Rumours are surfacing about China possibly cutting rail freight subsidies, subsequently increasing transport costs for shippers choosing this modality. Multiple industry sources told RailFreight.com that there is nothing confirmed and shared their views on the matter.
“For now it seems to be just a rumour, even though subsidies were already removed from the most frequently used terminals, as they were used to ‘launch’ the development of the particular terminal”, said Maurizio Rinaldi, Country Manager Italy at Bahnoperator. This trend was confirmed by rail freight consultant Xavier Wanderpepen, who added that China has been working to reduce subsidies since 2018.
Wanderpepen added that “this spring period does not seem the most logical (to cancel subsidies, ndr), considering price indicators”. For example, maritime transport between Shanghai and Rotterdam is at its lowest rate levels, 2,500$ per 40-foot container, making it a quite attractive option compared to the more expensive rail. Rinaldi also pointed out how a cut of subsidies is likely to have an impact on rail freight prices. However, “if transit for all types of goods from Russia were to be reopened, the train service would also become attractive again at higher fares”, he added.
‘China could do without subsidies’
One of the reasons why rail freight subsidies might be cut in China is that local authorities are in charge of them and sometimes they struggle to keep up. “It is no secret that these subsidies, funded by regions and cities, are sometimes difficult for them to sustain—each BRI container departing or arriving represents a financial burden for them”, Wanderpepen pointed out. Hence, it is not out of the ordinary that they would try to reduce them if the chance presents itself.
Finally, China’s economic power might allow it to get rid of subsidies and just make rail freight cheaper altogether, according to Wanderpepen. “with a record trade surplus of nearly $1,000 billion for 2024, China could easily allocate $500 million or more to its rail exports, as any reduction in the price paid by the customer is equivalent to an export or production subsidy”, he concluded.