Reorganized railways an engine for reform

Updated: 2013-04-11 07:44

By Xu Wei (China Daily)

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The commercial enterprise also inherited the ministry's massive debts.

According to authorities, China Railway Corporation was launched with a registered capital of 1.03 trillion yuan ($166.3 billion). Yet at the last count, the ministry was estimated to be 2.60 trillion yuan in the red, mostly built up since 2008 from the large-scale high-speed rail projects.

Investment previously came from bank loans and through issuing bonds; although there now appears to be a consensus among experts that there should be greater diversity in the sources of funding.

The debate over whether to allow private capital investment in rail projects was ongoing before the announcement to dismantle the ministry. In January, the topic was high on the agenda at a work conference in Beijing.

Sheng Guangzu, railways minister at the time but now general manager of China Railway Corporation, told the conference a national fund may be set up to encourage private investment in high-speed projects and to ease the financial burden. He said local governments and State-owned and private enterprises will be encouraged to participate in construction.

It is not certain whether that plan is still in progress after the ministry's separation, but experts say funding solutions need to be found, and found quickly.

For Liu Shijin, deputy director of the State Council's Development Research Center, the key test of whether the reform is a success will be if private investors have access, and are willing to get involved.

The railways "need money and the private sector has a large amount of it that is awaiting approval to enter," he said in a speech at an economic forum in Guangzhou on March 31. "The main problem the reform should solve," he added, "is allowing funding from outside (government channels) and establishing a clear business and governance structure, one that protects the interests of investors."

Again, there are those who urge caution, such as Zhang at the Comprehensive Transport Institute. "We do need to shift funding away from bank loans and State subsidies," he said, but authorities must "carefully consider the national interests involved."

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