China tries to restructure away its flawed agencies

BEIJING In the annals of Chinese bureaucratic power, the Railways Ministry stood apart. Running everything from one of the world's busiest rail systems to a special police force, the ministry was so pervasive and powerful it resisted government reform efforts for years. Chinese called it "Boss Railway."

On Sunday, the government gave notice it was firing the boss.

Under a plan presented to the national legislature to restructure Cabinet departments, the government said it would dismantle the ministry, moving its railways operations into a newly created company and placing its regulatory offices in the Transport Ministry.

The Railways Ministry isn't the only target. Under the restructuring plan, two agencies that censor broadcasters and print media will be combined into a super media regulator; the commission that enforces the much disliked rules that limit many families to one child will be merged with the Health Ministry; and five agencies that police fisheries and other maritime resources are being united into one to better assert China's control over disputed waters, potentially sharpening conflicts with Japan, Vietnam and the Philippines.

Certain to be passed by the rubber-stamp legislature this week, the plan reflects the priorities of the newly installed Communist Party leadership as it seeks to reduce waste, boost efficiency and address quality of life issues for a more prosperous, demanding society.

The scope and power of the Railways Ministry made it a natural place for the leadership to stamp its determination. As it expanded the railway system and built the world's largest high-speed rail network, the ministry ran up hundreds of billions of dollars in debt and sank into corruption, giving critics an opportunity to pounce.

Reformers crowed at the ministry's abolition, saying it would further market reforms. "It means the country has removed the last `stronghold' in the way of reforming the industry from a planned economy to market economy," the official Xinhua News Agency quoted Wang Yiming, a government macro-economic researcher, as saying.

Even the current — and seemingly last — railway minister had to bow to the inevitable.

"I've no regrets. Whether I'm minister of railways or not is no matter," Sheng Guangzu said on China National Radio. "The key is to develop China's railways. I'm subordinate to the needs of the national cause."

Reform-minded Chinese leaders and officials had been trying to bring the railways to heel for 15 years when the government first started separating state companies from regulatory bodies. At each turn, the ministry resisted, using long-standing ties to the military and building a record for performance. Over the past decade, it created the showcase high-speed rail system touted by the leadership as a symbol for Chinese technological power on par with the manned space program.

In announcing the restructuring, a senior Chinese official praised the progress but explained why the ministry must be abolished.

"In recent years, the railways have developed in leaps and bounds and safeguarded the smooth running of the economy and the needs of people's lives and production. But its government and enterprises are not separated. It doesn't link smoothly with other modes of transport, and there are other problems," Ma Kai, secretary-general of the State Council, the Cabinet, told the legislators.

• Why China is crushing a Mongolian intellectual
• China's Xi Jinping bans official extravagance
• After economic boom, China now focuses on quality of life

Complaints about the railways are common among Chinese. It's the most popular form of long-distance transport, especially for Chinese who cannot afford to fly. But buying tickets is difficult, and food, drink and other services on trains are poor — problems often attributed to corruption.

"Corruption? Of course there is in the railway bureau. There's that Boss Railway!" Chang Shangxi, a 32-year-old businessman, said as he waited for a high-speed train in Shanghai this past week. "I am sure corruption causes corners to be cut and work to be faked as the companies have to make the money back that they spent on corruption."

The ministry's ability to throw money around to get things done and preserve its power in the end helped bring it down. Liu Zhijun, the bullet train network's top booster, was ousted as minister two years ago, amid accusations that he took massive bribes and steered contracts, some of them associated with the high-speed rail network. Among his rumored misdeeds: having 18 mistresses.

Though he awaits trial, his fate — and perhaps the ministry's — seemed sealed when bullet trains collided near the eastern city of Wenzhou in July 2011, killing 40 people and injuring 177. The accident outraged the country's growing middle class — the prime users of the high-speed rail. Taking to social media sites, they questioned whether speedy development resulted in shoddy work. A government investigation cited design flaws and mismanagement.

In the aftermath, the government began taking a harder look at corruption throughout the railways and the ministry. In one case, almost all of a $260 million railway line in the northeast had to be redone because unqualified sub-contractors filled bridge foundations with rocks and sand instead of concrete.

The ministry employs 2.1 million staff and handled 1.8 billion passengers in 2011. Its subsidiary departments oversee all railway operations, and its companies are involved with everything from design of railways to construction and freight transport. Beyond that, there's the Railway Art Troupe, which sings, dances and puts on acrobatic shows and operas. The China Locomotive Sports Team trains athletes in soccer, boxing, weightlifting, swimming, and track and field.

Until last August, it operated its own courts, as it did a police force until 2009. Capital spending last year was 630 billion yuan ($100 billion) — rivaling the entire 670 billion yuan ($105 billion) military budget — and its mounting debts have worried the government.

"Who is going to pay the debt that is expected to amount to nearly 3 trillion yuan?" said Zhao Jian, a railway expert at Beijing Jiaotong University. He said the official debt figure is 2.6 trillion yuan ($414 billion), but he estimates it will go higher as ongoing projects are completed.

The reorganization is supposed to add further restraint. A newly created China Railway Corporation will build and manage freight and passenger services, while a railways administration under the Transport Ministry will set technical standards and enforce them.

The railway so far has been able to rely for a large part on drawing revenues from freight and passenger services. A big challenge ahead is keeping that money coming in as competition from planes, cars and river transport increases.