Because of the country’s large size and population, railways play an important role in the transport sector of the People’s Republic of China (PRC). To increase rail transport capacity to meet economic and social development needs, the government embarked on a railway development plan that prioritized expanding the railway network and constructing new lines in the central and western regions.

The Taiyuan–Zhongwei Railway Project was included in the 11th Five-Year Plan (2006-2010) of the Ministry of Railways (MOR).  The project railway was to run through the central part of Shanxi Province and the northwestern parts of Shaanxi Province and the Ningxia Hui Autonomous Region, crossing 7 prefecture level cities and 22 counties and districts, 11 of which were classified as national or provincial poverty counties in 2005.  

At government’s request, the Asian Development Bank (ADB) approved in November 2006 a $300 million loan for this project, which had four planned outputs at appraisal: (i) Taiyuan–Zhongwei railway infrastructure and associated facilities improved, (ii) employment opportunities generated for poor and vulnerable groups, (iii) corporate governance promoted, and (iv) institutional capacity of the project company, the Taiyuan-Zhongwei-Yinchuan Railway Company (TZYRC), strengthened. The project’s envisaged impact was improved transport system in the region that supports socioeconomic development and the PRC’s western development strategy.  Its intended outcomes were (i) an efficient, safe, reliable, affordable, and environmental-friendly railway transport system developed in the region; and (ii) local economic development, particularly small business, industry, and tourism, promoted.

At completion, the project delivered all its planned physical outputs, with some variations and/or shortfalls.  A total of 941 kilometers (km) of electrified, standard gauge, Class I railway line was constructed, 509 km in double-track line and 239 km in single-track line. The completed railway has a capacity of 40 pairs of passenger trains per day and 60 million tons of freight per year. Equipment and facilities for power supply, signals, and telecommunication and train control systems were installed and fully commissioned. Safety technology and equipment were incorporated in accordance with the national railway standards.

A total of 40 new stations were built and 3 existing ones were expanded. All the new stations are open to freight traffic, and 18 stations are open to both freight and passenger traffic. A total of 191.3 km of station access roads were constructed by local governments; in addition, 538.3 km of construction access roads were funded by contractors. Many of these roads have become the main roads in remote areas, benefiting the local communities.

Against a target of 453,000 person-years, 365,480 person-years in project employment were generated, 15% of which was captured by the local market.  Of the unskilled labor employment created, 86% went to laborers from poor households and 11% went to women. The employment deficit and lower-than-targeted percentage of unskilled work generated were due to better construction organization and greater use of mechanization in construction work.

Diversification of financing sources, by engaging strategic and private investors, was successfully undertaken.  The TZYRC is a limited liability company incorporated by the MOR, Shanxi, Shaanxi, and NHAR governments, and seven other companies. TZYRC total shareholder equity in the project represented 33% of the total cost. Of the total equity, the MOR contributed 34%, the two provinces and the NHAR contributed 26%, and the other investors contributed 40%.

Despite the establishment of the TZYRC as an independent body, railway operation was not separated from the MOR as envisaged. It was assigned to the MOR’s Taiyuan, Lanzhou, and Xi’an railway administrations, with each responsible for railway operation for the section within its administrative boundaries.  Because of this arrangement and the inability of the MOR to identify alternative areas for institutional strengthening, the project’s planned fourth output, which assumed that operational control of the railway will be with the TZYRC, was not implemented. 

Notwithstanding the shortfalls, the project achieved its intended outcomes and impact.  It greatly increased the region’s transport capacity.  Freight and passenger traffic has been robust since the railway began operations.  From 16.6 billion ton-km in 2011, the amount of freight (mainly coal, petroleum products, and minerals) rose by 32% to 21.9 billion ton-km in 2012. Freight traffic is forecast to reach 42.9 trillion ton-km in 2031, growing annually at an average of 4%.  Passenger traffic is expected to reach 8.4 trillion passenger-km in 2031, representing an average 3% annual increase.

With the cost of rail transport comprising one-third to one-half that of road transport, the project has provided the region with a low-cost transport alternative.  The shift from road to rail transport, particularly by passenger traffic, has consequently been significant, supporting increasing mobility and socioeconomic activity in the project area.  In addition to triggering local economic development directly by procuring local goods and services and providing jobs during implementation, the project thus has contributed to local economic growth post-completion. 

From 2006 to 2012, gross domestic product growth in prefecture level cities in the project area ranged from 128% to 530%, and the government fiscal revenues grew 136%—533%.  Per capita income of farmers increased by 103%–265% in counties and cities along the railway.  With rural incomes in poorer areas growing faster than those in better-off regions during project implementation, the geographical development gap has been narrowed. Stronger fiscal capacity has enabled governments at all levels to continue to invest in public infrastructure, providing villages with better road access, drinking water, and telephone and electricity services.

The MOR served as the executing agency.  Implementation of the various project components was divided among relevant MOR and TZYRC units.