Fund to ease burden of rail projects

A national fund is likely to be set up to encourage private capital to invest in China's high-speed railway development and help ease the increasing financial burden stemming from intensified high-speed rail construction, a top railway official said on Thursday.

China's high-speed railway network will reach 18,000 km by 2015, Sheng Guangzu, minister of railways, told a national railway work conference.

That means more than 8,000 km of newly built high-speed railways will be put into service in three years.

By the end of 2012, the total length of high-speed railways in operation in China had reached 9,356 km, the longest in the world, he said.

The ministry plans to invest 650 billion yuan ($105 billion) in railway infrastructure, aiming to have 5,200 km of new railways opened this year.

Meanwhile, the ministry is under a heavy debt, leaving experts to worry about how long China's sprawling railway construction can continue.

Wang Mengshu, a member of the Chinese Academy of Engineering and an expert in underground engineering, said according to the ministry's plan, around 600 billion yuan is needed every year for the next three years to support the extension of the network.

By the end of the third quarter of last year, the assets of the ministry stood at 4.3 trillion yuan, and its debt reached 2.66 trillion yuan, a debt ratio of about 62 percent, according to media reports.

"Considering the huge debt burden, the financial pressure weighing on the ministry will be very heavy," Wang said.

Sheng acknowledged the increasing financial burdens the ministry faces, from "construction of new lines, payment of quickly increasing loans and interest, and higher labor and operation costs".

Though some experts suggest the ministry can learn from Japan and sell its non-transport assets, such as real estate, the ministry has no plan to do so.

Instead, the ministry plans to increase its income from the non-transport sector by means such as developing real estate and tapping e-commerce.

Meanwhile, the ministry will diversify financing channels by encouraging local governments, enterprises and the private sector to participate in railway construction, Sheng said.

A national railway development fund will be established as an investment platform for social and private capital, Sheng said.

Wang from the Chinese Academy of Engineering said the fund is still under discussion.

"It is likely the central government will take about 30 to 40 percent of the share of the fund to alleviate the financial pressure on railway authorities," he said, without elaborating.

Currently, the ministry has to rely on bank loans to build railways. It has to pay back 10 billion yuan in interest every year, according to Wang.

Liu Xiao, a researcher at the Anbound Consultancy in Beijing, said the fund will most likely be dominated by government funds instead of private capital.

"We can see almost no private capital is involved in China's railway projects, except for a few cargo lines, which are partly funded by some enterprises," he said, adding passenger rail lines offer no attraction to private investors, as their operation is hardly profitable.

There were a few cases in the past years in which private capital participated in the construction of railways, but most of them ended in failure, he said.

"Private investors in cargo lines couldn't participate in the operation of the lines, although they were shareholders, because of the monopoly of railway authorities," Liu said.

Besides, few laws protect the rights of private investors, which can hold them back from investing in railways, he said.

In that case, State-owned enterprises are more likely to be the main investors in the fund, he said.

A State-owned enterprise may be set up under the ministry in the next few years, and rail lines will be operated by enterprises instead of the ministry to increase efficiency, he said.

Contact the writer at wangxiaodong@chinadaily.com.cn