Ministry seeks extra rail funds

Ministry seeks extra rail funds :CHINA’S debt-laden Ministry of Railways has reportedly asked the central government for a further 800 billion yuan (US$126 million) in additional funds to ensure the building of the world’s largest high-speed rail network stays on track.

The ministry, which ended its second quarter owing creditors a staggering 2.09 trillion yuan, had planned to ask the government for 400 billion yuan from the fiscal budget, with the balance to be covered by bond sales, The Economic Observer cited unidentified sources at the ministry.

But the plan is still under study and has not been finalized yet, the sources added.

The ministry, which is at the center of alleged corruption scandals after former minister Liu Zhijun was toppled has had to shelf its plan to construct over 10,000 kilometers of railways because funding has dried up, leaving workers without pay, said Wang Mengshu, vice chief engineer of the China Railway Tunnel Group, the major builder of the rail network.

Large sums of money are required to complete the on-going construction of another 13,000 kilometers of rail tracks, sources told the Beijing-based paper. The ministry will need at least 1 trillion yuan in total to tide over its financial crisis, the paper added.

A tight liquidity environment and a deadly train crash in July in Wenzhou City, Zhejiang Province, which has rattled investor confidence, combined to limit the ministry’s ability to borrow money or sell bonds.

The ministry relies heavily on bond sales to finance rail building. At the start of this month, the ministry said it plans to sell 20 billion yuan of bonds. Earlier this month, it paid off part of its huge debt after securing bank loans worth 200 billion yuan.

Most of the ministry’s 58.53 percent asset-liability ratio is attributed to the building of the high-speed railway network, part of the government’s 4 trillion yuan economic stimulus package unveiled in 2008 amid the global economic crisis.

According to a report by the National Audit Office issued last year, nearly 66 percent, or 1.3 trillion yuan, of the debt owed by the ministry at the end of 2009 was long-term liability to banks and bondholders. That means the ministry will continue to pay large sums of interest yearly.

China Minsheng Bank projected the ministry will have to pay over 100 billion yuan of interest annually in the next few years and for its asset-liability ratio to balloon to 70 percent next year.

Ministry seeks extra rail funds

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