China Freight Transport Report Q3 2008

The major earthquake which hit Sichuan province on May 12 2008, with a magnitude reading of 8.0 on the Richter scale, caused widespread damage and destruction killing an estimated 74,000 people with a further 247,000 people injured. Rescue efforts were hampered by the disruption of transport systems or the isolation of the affected areas. Key roads were damaged or cut off entirely by rockfalls and mud.

Workers had to use explosives to clear boulders and open a way through. Chengdu's Shuangliu International Airport was closed for two days as damage had to be repaired. The Lanzhou-Chengdu- Chongqing refined oil pipeline, operated by China National Petroleum Corp (CNPC) had to be closed for 22 hours after the quake. Tunnel 109 of the Baoji-Chengdu Railway collapsed at the time of the quake, crushing a 40-carriage freight train that was passing through. An estimated 500 tonnes of jet fuel being carried by the train caught fire. Emergency workers reportedly took 40 hours to bring the fires under control. A key bridge on the same railway was also damaged by rock falls. In all, some 180 different trains were stranded by the quake. The authorities said they would investigate claims of shoddy building standards; many of the dead were schoolchildren, whose building collapsed around them, while some other buildings in the same locations appeared to have withstood the quake relatively unscathed. While the impact of the disaster was undoubtedly serious, we do not see it radically altering the strong medium term performance of the country's freight industry, driven by sustained economic development. In our China Freight Transport Report Q208, BMI predicts that total freight traffic carried will grow at an average annual rate of 14.4% in 2008-12 China's economy continues to power ahead, driving trade and demand for freight transport. Our latest estimates put GDP growth at 10.7% this year, easing a fraction to 9.5% in 2009. China's foreign trade will continue booming: up by a predicted 25.2% in 2008 and 21.5% in 2009. This double-digit trade growth continues to create massive demands on the country's transport and infrastructure capacity.

Underpinning the optimistic outlook is a supportive operating environment. BMI has given China's freight industry a rating of 67.2 (out of a theoretical maximum of 100), which places it right up at the top of the Asia Pacific region.

Based on available data, we have trimmed down both rail freight and river and sea-cargo growth. Our forecast for freight carried across all modes in 2008-2012 now stands at annual average growth of 14.4%, expressed in bntkm. According to our latest estimates, transport and communications GDP rose by 13.3% in 2007, 1.9 percentage points (pps) faster than overall GDP, which we estimate expanded by 11.4%. For the 2008-2012 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 11.0%, versus 9.7% for overall GDP.

The total value of transport and communications GDP will rise to US$514.2bn in nominal terms by 2012, representing 6.3% of China's GDP. The transport and communications sector employed 22.0mn people, or 2.7% of the labour force, in 2007. We see the figure rising to 23.2mn by 2012.

Prospects for the freight-transport industry are encouraging. As our figures indicate, the freight sector will continue to grow at a significantly faster rate than the economy as a whole, in line with intensifying demand for transport at this stage in the Chinese economy's development. By transport modes, growth will be led by oil and gas pipelines (at an average rate of 17.5% a year), shipping and inland waterways (15.4%), road haulage (14.6%), airfreight (11.5%), and rail freight (also 11.5%).