China postpones the elimination of subsidies for rail transportation on the Silk Road to 2023
Elimination of subsidies should prompt the industry to focus on rail service quality.
While earlier the cancellation of government funding raised concerns among stakeholders, the current high demand and transportation rates have led to a consensus in the industry: government support is no longer needed.
For example, freight rates between China and Europe at the beginning of the year peaked at USD 18,000 over 40 feet, they are now still at a historically high level of about USD 13,500. China is phasing out rail subsidies and plans to end it by 2023.
Previously, at its peak, the subsidy for the transportation of a 40-foot container ranged from $ 3,000 to $ 5,000, now it is $ 1,000″ said Jack Yang, founder and CEO of New Silk Road Intermodal. At first, it was planned to abolish subsidies in 2022, but due to the pandemic, they were extended for another year.
It is noted that local authorities will continue to be able to financially stimulate rail transportation. Mr. Yang predicts an inflow of cargo traffic to large terminals. In his opinion, small rail terminals that do not receive subsidies from provincial governments or do not receive enough of them will be forced to close.
Cargo will be diverted to large rail terminals such as Chengdu, Chongqing or Xi’an.
“The elimination of subsidies will induce the industry to pay more attention not to quantity, but to quality, given the problems that have arisen this year: the congestion of railway terminals and the increase in transit time,” he concluded.
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