Rusi Wang

Rusi Wang

Transportation network equilibrium modeling and optimization

Incorporating revenue loss and congestion cost into rail freight subsidy design: Lessons learned from the China-Europe freight transportation network

Chi Xie* International School of Business, Hainan University, China School of Transportation, Tongji University, China Key Laboratory of Road and Traffic Engineering of Ministry of Education, Tongji University, China Urban Mobility Institute, Tongji University, China , Rusi Wang School of Transportation, Tongji University, China Key Laboratory of Road and Traffic Engineering of Ministry of Education, Tongji University, China , Dianlei Wang School of Transportation, Tongji University, China Key Laboratory of Road and Traffic Engineering of Ministry of Education, Tongji University, China , Bo Zou Department of Civil, Materials and Environmental Engineering, University of Illinois Chicago, United States , Xiaowen Fu Department of Industrial and Systems Engineering, Hong Kong Polytechnic University, Hong Kong , Xiqun Chen International School of Business, Hainan University, China College of Civil Engineering and Architecture, Zhejiang University, China , Qing-Chang Lu School of Electronics and Control Engineering, Chang’an University, China
* Corresponding author

Published in Transport Policy, 2025, vol. 174, article 103819.

Abstract

Using the China-Europe freight transportation market as a real-world case, this study utilizes network-based evaluation and optimization models to analyze and improve the efficacy of government subsidies on China Railway Express (CRE). To ensure the completeness and effectiveness of the evaluation and optimization results, we include into the models the full range of CRE service lines, China-Europe liner shipping lines, major highway networks in China and Europe, and all types of containerized freight demands in the market. A multimodal, multicommodity freight transportation network equilibrium model explicitly considering transportation capacity is taken as a subsidy evaluation tool, which can characterize the individual mode-route choice behavior and take into account shipping cost, transit time, capacity-induced congestion surcharge, and unobserved transportation impedances as shippers’ decision-making disutility. The evaluation work reveals that the currently implemented subsidy scheme increases the CRE-carried freight volume by 78.7% in total. However, it does not perform equitably well for those CRE lines that experience heavy congestion or depart from coastal regions of China, and it even exacerbates the congestion of some CRE lines. To overcome these unexpected deficiencies, we propose and implement a subsidy optimization model of a bi-term objective and bi-level structure for simultaneously maximizing capacity utilization and minimizing congestion level of all CRE lines. This model embeds the aforementioned network equilibrium model as its submodel in the lower level. From the optimized subsidy scheme, we found that while the government’s monthly average subsidy expenditure is lowered by 7.7%, the total revenue loss and total congestion surcharge decrease by 27.7% and 63.9%, respectively, compared to the current subsidy scenario. This result indicates a tripartite win-win-win situation for the government, CRE operator, and cargo shippers. Overall, through such an optimal subsidy design, the social benefit generated by a subsidy expenditure of $1 increases from $0.69 to $1.20 to the entire China-Europe freight transportation market.

Keywords

China Railway Express, subsidy allocation, multimodal multicommodity transportation network, revenue loss, congestion surcharge

Highlights

  • Addresses the freight subsidy optimization problem based on a multimodal multicommodity network equilibrium model.
  • Considers the carrier’s revenue loss and shippers’ congestion surcharge simultaneously.
  • Compares the proposed optimization scheme with the currently implemented subsidy scheme to demonstrate its effectiveness.

Poster summarizing the Transport Policy study on China–Europe rail freight subsidy design

Article History

Received 22 July 2025; Received in revised form 7 September 2025; Accepted 21 September 2025; Available online 23 September 2025; Version of record 18 October 2025

Indexing

Social Sciences Citation Index (SSCI), Web of Science Core Collection [Accession Number: WOS:001602460900001]

Ei Compendex [Accession number: 20254619488815]

TRID Database [Accession Number: 01970786]

Recommended citation: Xie, C., Wang, R., Wang, D., Zou, B., Fu, X., Chen, X., & Lu, Q.-C. (2025). Incorporating revenue loss and congestion cost into rail freight subsidy design: Lessons learned from the China-Europe freight transportation network. Transport Policy, 174, 103819. https://doi.org/10.1016/j.tranpol.2025.103819
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