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China: Ministry of Railways Dismantled

(Apr. 4, 2013) On March 10, 2013, the Chinese government announced a new government restructuring plan at the plenary meeting of the First Session of the 12th National People’s Congress (NPC). (Full text of the restructuring plan [in Chinese], XINHUANET (Mar. 10, 2013); for major changes made by the plan, see Factbox: Main Changes in China’sGovernment Restructuring Plan, Reuters (Mar. 10, 2013).)

Under the restructuring plan, the powerful Ministry of Railways has been dismantled. A State Railway Administration (SRA) is to be established under the Ministry of Transportation to perform the administrative functions of the former Ministry of Railways. A wholly state-owned company, the China Railway Corporation, will be incorporated to carry out the former Ministry’s business functions. (Id.)

The Ministry of Railways has long been criticized for its monopoly of rail service, low level of efficiency, corruption, and other problems. It has enjoyed considerable privileges compared to most other State Council ministries and commissions. In the 2008 round of government restructuring, the “super” Ministry of Transport was established, which included the old Ministry of Communications and the Civil Aviation Administration, but not the Ministry of Railways. The previous Railways Minister, Liu Zhijun, was removed from office in early 2011 for allegations including corruption; his case has not yet been heard by a court. (Laney Zhang, Trains and Corruption in China, In Custodia Legis (Mar. 24, 2011).) In 2012, 17 intermediate and 58 lower-level special railway courts that had been under the purview of the Ministry of Railway were integrated into the national court system. (Laney Zhang, China: Railway Courts Integrated into National Court System, GLOBAL LEGAL MONITOR (Sept. 12, 2012).)

The new government restructuring plan was passed by the NPC on March 14, 2013. On the same day, the State Council published an order on its official website approving the incorporation of the China Railway Corporation. (Guowuyuan Guanyu Zujian Zhongguo Tielu Zonggongsi Youguan Wenti de Pifu [Reply of the State Council on Relevant Questions Regarding the Incorporation of China Railway Corporation] (Guo Han [2013] No. 47), WWW.GOV.CN (Mar. 14, 2013).)

According to the incorporation order, the China Railway Corporation, with a registered capital of 1.04 trillion yuan (about US$165.73 billion), is a wholly state-owned company under the administration of the central government. The Ministry of Finance will represent the State Council in performing investor functions. (Id.)

The incorporation order also states that the former Ministry of Railways’ assets, liabilities, and personnel will be transferred to the new corporation. Before the problems regarding the former Ministry’s debts are properly resolved, the order says, the state will allow the corporation not to turn over gains from the state-owned assets. The corporation will continue to enjoy favorable tax treatment, and railway construction bonds will continue to be government-supported. (Id.) According to previous data, the Ministry had debts totaling 2.66 trillion yuan (about US$428 billion). (Lu Bingyang, Questions Raised over Ministry of Railways’ Debt Amid Split, CAIXIN ONLINE (Mar. 13, 2013).)

On March 17, 2013, the Ministry of Railways’ plaque outside its office building was replaced by one of the new China Railway Corporation, marking the end of one of the oldest ministries of the People’s Republic China. (Zhongguo Tielu Zonggongsi Guapai, Renzhong Daoyuan [China Railway Corporation Hangs Plaque, an Arduous Task and Long Way to Go], XINHUANET (Mar. 18, 2013).)