China’s railway investment may top US$112bn in 2013

China’s railway investment  : In order to bolster economic growth, China is expected to continue expanding its railway investment in 2013. The rapid expansion could continue draining government coffers without the support of private investment.

As the mileage of railway investments next year may exceed this year’s level, the total scale of railway investments will range from 500-700 billion yuan (US$80-$112 billion) in 2013.

After remaining in the doldrums for half a year, railway construction started to pick up in the fourth quarter.

Funding for railway investments comes from several sources: direct investment by the central government, railway companies, municipal governments, railway bonds, private capital and railway loans. Various central-level government agencies have been supportive of the Ministry of Railways in their investments. In September, in its monetary policy report, the People’s Bank of China — China’s central bank — explicitly pledged to support the continuation of railway and other infrastructure construction projects, prompting major banks to increase their loans for railway projects.

The amount of bonds issued by the Ministry of Railways has exceeded the legal ceiling of 40% of its net assets. The National Development and Reform Commission, however, issued a decree exempting the Ministry of Railway from the restriction and permitting it to continue floating bonds. This year, the ministry has floated 200 billion yuan (US$32 billion) in railway bonds, including 150 billion yuan (US$24 billion) in railway construction bonds and 50 billion yuan (US$8 billion) in medium- and short-term financial bills.

A considerable portion of the funds raised by the Ministry of Railways via bond issuance has been used in the construction of China’s high-speed railways. Following the inauguration of the Beijing-Guangzhou high-speed railway, China’s high-speed railway network has begun to take shape, with various provinces having started or sped up their high-speed rail construction.

In an interview with the Shanghai-based National Business Daily, Zhao Jian, professor at Beijing Jiaotong University’s School of Economics and Management, said that the accelerated development of railways has contributed significantly to China’s economic growth.

The Ministry of Railways is laden with a high debt ratio. According to its financial statement, as of the third quarter, the ministry’s assets/debt ratio reached 61.81% and its after-tax deficit amounted to 8.5 billion yuan (US$1.4 billion).

Hu Siji, professor at Beijing Jiaotong University’s School of Traffic and Transportation, said the central government should take over the debt from railway construction, since railway companies are incapable of repaying the gargantuan debt and the railway system is a public service.

railway investment

Source : wantchinatimes

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