China Railways

Image of Shanghai Maglev Train

Governance and Organization of Railway Enterprises

Since MOR has formal responsibility for governance of the 18 RRAs, the RRAs have no boards of directors or other external supervisory bodies and each RRA has a railway Head who reports to MOR. The RRA functional managers report to both the RRA Head and less directly to the functional heads at MOR central administrative unit in Beijing. The RRA organizational structure is similar and tends to mirror the functional classifications that exist at the Ministry level.

Recently, MOR has improved China Rail organization in several ways. During the 1990s, non core activities were separated, including construction, manufacture, telecom, design, education and social activities. During 1992-05, the rail operations staff was reduced from 2.2 million to 1.4 million and traffic increased by 60 percent, which more than doubled railway employees’ average labor productivity.

In 1999, the Asset Operation Liability System (AOLS) was implemented, and RRAs managers became accountable for return on capital, output, profitability, and safety. Under the AOLS, managers are responsible for managing and increasing assets assigned to them, and incentives are provided to those who exceed agreed performance levels. Each member of RRA management teams, right down to stationmasters, makes an ‘incentive deposit’ proportionate to their rank and must forfeit the deposit if targets and commitments are not met. If managers exceed targets, their deposit is refunded and they get a bonus—up to double the value of the deposit. Since AOLS was implemented, RRAs’ financial performance has improved steadily, as has the overall financial performance of China Rail. In addition, safety has improved significantly and accidents have declined. Most RRAs now achieve higher bonuses.

Prior to 2005, each RRA was divided into about five sub-administrations, each with a structure parallel to that of the RRA. In 2005, the secondary level of regional administration was abolished, a major and successful achievement in streamlining corporate management that gave RRAs a direct line of management to depots, stations, and yards and provided a platform to improve utilization of locomotives and crews, which had often been confined within sub-administration boundaries.

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