Original publication: October 2018
Author: PROTRANS – Marcin Wołek
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This overview of the transport and tourism sectors in China was prepared to provide information for the mission of the Committee on Transport and Tourism to the country between 30 October and 2 November 2018.

 

1. Introduction

Transport and Tourism in ChinaChina covers an area of around 9.6 million km² (thus being the world’s fourth largest country in terms of area) and is populated by 1 374 million people (on 2015 figures) [1] . China borders on 14 countries, sharing frontiers with Mongolia in the north, the Russian Federation and North Korea in the north-east, Vietnam and Laos in the south-east, Myanmar, India, Bhutan and Nepal in the south, and Pakistan, Afghanistan, Tajikistan, Kyrgyzstan and Kazakhstan in the east. The urbanisation rate of China is about 59 % [2].

 

According to Chinese government figures, economic growth in recent decades has lifted about 740 million people out of poverty. China has also witnessed the largest migration ever from rural to urban areas[3]. However, the country’s regions remain vastly diverse in terms of technology, energy mix and economic development[4]. Calculated at constant prices, the gross domestic product (GDP) of China multiplied 33.5 times in the period 1978-2017[5]. In 2017, China’s GDP (at current prices) amounted to USD 12,014 billion[6]. Projected real GDP growth in 2018 is expected to reach 6.6 %[7]. In 2017, the Chinese economy ranked first in Asia and second in the world[8]. Thereby, its value measured by GDP is bigger than that of the economies of Japan, Germany and the UK put together. China’s GDP is predicted to grow at a rate of 4.8 % per annum over the next 20 years[9]. This means that China could become the world’s largest economy by 2030.

China’s share of world GDP has risen from 2.7 % in 1980 to 15 % in 2017; its GDP per capita is expected to exceed the world’s average by 2023 (please see Figure 1 below). The growth of China’s economy is mainly driven by infrastructure investment. In the period 2009-2014, the investment contributed about 45 % to GDP growth[10].

Figure 1: World’s and China’s GDP per capita and share of China in world GDP

The rate of recorded unemployment amounted to 5 %, with 774 million of employed persons in 2015[11].

In 2017 Chinese exports of goods amounted to USD 2 263 billion (12.8 % of global export value), while imports of goods stood at USD 1 842 billion (10.2 % of global import value). The main markets to which Chinese goods are exported included, as of 2016, the US (18.4 %) and the EU28 (16.4 %). As for imports, the main partners of China include the EU28 (13.1 %), South Korea (10 %), Japan (9.2 %) and the US (8.5 %)[12].

Gross domestic spending on research and development (R&D), rose to approximately 2.1 % of China’s GDP in 2016, from 0.9 % in 2000[13] (1.9 % for the EU in 2016).

The ruling Communist Party of China (CPC) has been the country’s sole political party since 1949. The General Secretary, Xi Jinping, assumed the party’s leadership in November 2012 and simultaneously became President of the People’s Republic of China and Chairman of the Central Military Commission, which supervises the over two million strong People’s Liberation Army (PLA). The seven-member Politburo Standing Committee and the 25-member Politburo are China’s highest decision-making bodies. They are responsible to the larger CPC Central Committee, which meets in plenary session, usually once a year. The day-to-day administration of the country is entrusted to the State Council (including the State’s ministries and commissions and layers of ‘people’s governments’ below the national level). According to China’s state constitution of 1982, the National People’s Congress (NPC), the unicameral legislative body, oversees the State Council. In practice, the NPC is controlled by the CPC and is able to exercise little oversight over any institution under its official supervision[14].

The National Development and Reform Commission of the People’s Republic of China (NDRC) is an important body, being a management agency under the State Council. It has broad administrative and planning control over the Chinese economy, including the formulation and implementation of strategies of national economic and social development, as well as annual, medium and long-term development plans[15].

Regulatory framework for EU companies wishing to carry out business in China

According to a study by Mark Hedley[16], China’s entry into the WTO in 2001 helped to liberalise the country’s trade environment to some extent. However, many industries are still heavily regulated: industries are often off-limits to foreign companies or remain under severe limitations. For example, China severely restricts foreign companies’ involvement in the petrochemicals, energy and telecommunications sectors. Any foreign company looking to set up local production in China should first consult the China foreign investment catalogue, which divides foreign investment projects into ‘encouraged’, ‘restricted’ and ‘prohibited’ categories.

EU investors can, as foreign investors, start a business in China in one of five ways, namely as a: (i) Wholly Foreign Owned Enterprise (WFOE), (ii) Partnership Enterprise (PE), (iii) Representative Office, (iv) Joint Venture, or (v) Hong Kong Company. In China, every company with foreign shares amounting to 25 % or more is considered a Foreign

Invested Enterprise (FIE)[17]. If the whole company is controlled by non-nationals then it is considered as WFOE, the most common type of FIE. To start a company in China, an entrepreneur has to:

  • choose business scope and structure;
  • apply for approval of the Ministry of Commerce and the State Administration of Industry and Commerce (or local Administration of Industry and Commerce (SAIC or local AIC);
  • be sure that all foreign investors have approval to own shares in a Chinese company;
  • provide proof of registration with state and local tax bureaux;
  • obtain a business license; and, finally,
  • open a bank account[18].

Recently, President Xi Jinping announced China’s plan to open up its auto industry to foreign carmakers. Among the key measures proposed is the possibility for foreign automakers to own Chinese factories, instead of working through a 50-50 Chinese partner as is currently required[19].

2. General Information on Transport

Development of transport in China is part of the goals mentioned in a key report delivered at the 19th CPC National Congress in October 2017, putting it high on the government agenda[20].

In China, modal split is quite diversified, for both passengers and freight. Rail transport has the largest share of the passenger market, followed by road and aviation (more than one fourth of the total number of passenger-kilometres in 2016). In the case of freight, waterways dominated the market, although the relevant data also includes ocean, coastal and inland waterway operations. Rail achieved nearly 13 % of market share in the same year. Freight air transport has a vestigial share (please see Figure 2 below).

Figure 2: Transport passenger [pas-km] and freight [ton-km] modal split, 2016

The transport sector plays an important role in the Chinese labour market. Road transport accounts for more than one half of the total of 6.82 million employees (rail 27 %, road 56 %, water transport 7 %, air transport 9 % and pipelines 1 %)[22].

The 13th Five-Year Plan for Development (2016-2020) emphasised the low-carbon development of transport[23]. The various transport projects include: (i) further development of high-speed rail (to reach 30 000 km by 2020); (ii) speeding up the building of the national expressway network, resulting in the construction or upgrading of 30 000 km of expressways; (iii) pressing ahead with the construction of transborder thoroughfares between China and neighbouring countries and thoroughfares along the Belt and Road routes; and (iv) building logistics platforms for international freight trains in Ürümqi, Lanzhou and other major hub cities along the routes of the One Belt, One Road initiative (BRI)[24].

In 2008, China’s Ministry of Transport (MOT) was established in the context of institutional reform in order to create an efficient government department exercising the unified management of all transport modes, as well as postal services. However, this goal was not fully achieved until 2013, when the Ministry of Railways was eliminated and the management of conventional railways was transferred to the MOT[25].

There are ten functional divisions under the umbrella of the MOT, which exist for the purpose of establishing a convenient, smooth, effective, safe and integrated transport system[26]. The current Minister of Transport, Li Xiaopeng, assumed the office in September 2016.

[1]  http://www.stats.gov.cn/tjsj/ndsj/2016/indexeh.htm

[2]  https://toplink.weforum.org/knowledge/insight/a1Gb0000000pTCmEAM/explore/dimension/a1Gb00000015QrNEAU/summary

[3]  https://www.imf.org/en/News/Articles/2018/07/25/na072618-chinas-economic-outlook-in-six-charts

[4]  Zhu Liu, China’s Carbon Emissions Report 2016: Regional Carbon Emissions and the Implication for China’s Low Carbon Development. Belfer Center for Science and International Affairs. Cambridge, Mass: Harvard University, October 2016, p.1. https://www.belfercenter.org/sites/default/files/legacy/files/
China%20Carbon%20Emissions%202016%20final%20web.pdf

[5]  http://www.xinhuanet.com/english/2018-09/17/c_137474548.htm

[6]  http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Country=CN

[7]  https://www.imf.org/en/Countries/CHN#ataglance

[8]  International Monetary Fund: www.imf.org, (accessed: 13.07.2018).

[9]  Boeing Commercial Market Outlook 2018-2037 https://www.boeing.com/resources/boeingdotcom/commercial/market/commercial-market-outlook/assets/downloads/2018-cmo-09-11.pdf

[10]  Li Kaimeng: A Brief Introduction to China’s PPP Application in Transport and Logistics Sectors. https://www.unece.org/fileadmin/DAM/ceci/documents/2016/PPP/Forum_PPP-SDGs/Presentations/Kaimeng_LI-UNECE_PPP_Forum_March_2016_A_Brief_Introduction_to_China%E2%80%99s_PPP_Application_in_Transport_and_Logistics_Sectors.pdf

[11]  http://www.stats.gov.cn/tjsj/ndsj/2016/indexeh.htm

[12]  http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Country=CN

[13]   https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm

[14]  US Congressional Research Service – Understanding China’s Political System, Mar 2013, pp. 1-4 and China Information Centre – China’s Political System.

[15]  http://en.ndrc.gov.cn/mfndrc/

[16]  Mark Hedley – B2B International – Entering Chinese Business-to-Business Markets: The Challenges & Opportunities, (assessed: 09.10.2019).

[17]  Establishing and Operating a Business in China 2018, 2nd edition, Dezan Shira & Associates, 2017. www.ampia.org (accessed: 08.10.2018).

[18]  S. Yan, J. Tang, E. Wong, Doing Business in People’s Republic of China, EY, January 2015. www.ey.com (accessed: 08.10.2018).

[19]  Seattle Times – China is opening its car market, but auto companies say not enough – Apr 2018.

[20]  http://www.xinhuanet.com/english/2017-12/27/c_136855307.htm

[21]  http://www.stats.gov.cn/tjsj/ndsj/2017/indexeh.htm

[22]  http://www.stats.gov.cn/tjsj/ndsj/2017/indexeh.htm

[23]  The 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China (2016–2020). http://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf

[24]  The 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China (2016–2020). http://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf

[25]  Development of China’s Transport – State Council Information Office of the People’s Republic of China, December 2016. First Edition 2016. http://english.gov.cn/archive/white_paper/2016/12/29/content_281475528034734.htm

[26] The Ministry of Transport of the People’s Republic of China official website. http://english.gov.cn/state_council/2014/09/09/content_281474986284076.htm

Link to the full publication: http://bit.ly/629-173

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