China Railway and parcel delivery firm SF create cargo venture

Agreement will help rail operator increase cargo shipments by 30 per cent on its 127,000-kilometre network by 2020 as Beijing pushes to cut pollution

China wants to boost rail freight to take cargo off roads network. EPA

China Railway formed a cargo venture with express delivery company SF Holding as part of the nation’s efforts to draw in private enterprises to bolster the competitiveness of state companies.

Cargo subsidiary China Railway Express will hold a 55 per cent stake, while SF, the country’s biggest parcel delivery company, will own the rest of the venture, the national railway operator said on Wednesday. SF and China Railway will not own shares in each other.

The deal with SF is part of China’s efforts to let railways account for a larger share of cargo transportation to combat road-traffic pollution, and would help the rail operator meet a goal of increasing cargo shipments by 30 per cent by 2020. It is China Railway’s second tie-up with a private operator following the sale of a stake in a unit offering Wi-Fi on bullet trains to Tencent and Geely Automobile in June.

SF and China Railway’s venture, based in the southern city of Shenzhen, will offer cargo shipments by bullet and express trains.

China Railway, which operates the country’s 127,000-kilometre network, including 25,000 kilometres of high-speed rail, also plans to sell as much as $1.5 billion of properties and a stake in a railway operator in Hainan province this year.

China also has urged other transport and logistics companies including airlines to carry out mixed-ownership reform, meaning the sale of stakes in group-related companies to private firms.

China Eastern Air, owner of the country’s second-largest airline, agreed to sell 45 per cent of its cargo and logistics unit to four private companies as part of the diversification last year, and American Airlines agreed to buy a minority stake in China Southern Airlines.