Private capital encouraged to invest in railways

The central government on Monday published detailed plans to innovate railway funding and speed up railway construction as the new leadership is devoted to deepening reforms.

The State Council said in a statement that railway investment this year is likely to exceed the planned amount. Also, for this year and the following two years, the central government will provide transitional subsidies for China Railway Corp, established in March after a separation of the now-defunct ministry of railways' government and enterprise functions.

These measures are expected to strengthen growth in the world's second-largest economy, which slowed to 7.5 percent in the second quarter of this year.

Railway construction should be accelerated in an attempt to exceed the 2013 investment plan, while the building of railways and related infrastructure should be prioritized in the western and less-developed areas, the statement said.

The reform will see railway fundraising methods diversified and encourage private investment in railway construction as the ownership and management rights of intercity, suburban and branch railways, as well as railways for resource development, will be open to local government and social capital.

In addition, a railway development fund to support national railway projects will be set up with founding capital from the central financial fund coupled with social investment. Private investors will gain reasonable rewards, although they will not directly participate in the construction and management, according to the statement.

Xinhua News Agency reported in early August that the State-owned railway giant, China Railway Corp, raised fixed-asset investment to 660 billion yuan ($106.5 billion) this year to boost railway development, 10 billion yuan more than the investment target set earlier this year.

"Before the railway freight price determined by the market and the accounting system for nonprofit transportation is established, central finance will support the CRC with transitional subsidies this year and the following two years in view of the latter's insufficient capital, heavy interest rate and the nonprofit function of railway transportation," the statement said.

The State Council, led by Premier Li Keqiang, also asked its departments, including the National Development and Reform Commission, the Ministry of Land and Resources, and the Ministry of Environmental Protection, to speed up project approvals and railway construction in the western and less-developed regions to ensure key projects under the 12th Five-Year Plan (2011-15) will start on schedule and advance properly, according to the statement.

"Financial institutions, according to their own risk tolerance, should continue to actively support the building of key railway projects. The CRC will continue to enjoy the preferential tax treatment of the then railway ministry while railway-friendly policies by the State Council's departments and local governments will remain in place," the statement said.