The government should let more state-owned firms, such as Shenhua, and private investors play a bigger role in the rail industry to compete with China Railway, said Li Kun, a deputy director of the commission's transport research institute.

"The direction of China Railway's future reform should be in breaking up its dominance in providing rail services," Li said, adding that he was expressing his personal opinion and was not speaking on behalf of the planning agency.

The Communist Party pledged this week to make markets "decisive" in allocating resources, while stopping short of detailed policy shifts. China Railway took over the country's railway networks in March after the government dismantled the Ministry of Railways to battle graft and bureaucracy.

Reform of the railway system was not mentioned in the communique released after a key party meeting ended on Tuesday. The document also said the state would remain "dominant" in the economy.

While a break-up of the rail system was needed, it was unlikely to happen in the short term, Li said. The focus now should be on streamlining China Railway's management of the network, he said.

The Ministry of Railways had more than 2 million employees and 2.8 trillion yuan (HK$3.5 trillion) of debt at the end of last year.