HONG KONG: The central government plans to sell shares in a holding company that will control the rail link between Shanghai and Beijing, raising about $5 billion to fund railway expansion, two people with knowledge of the matter said.

China International Capital Corp, JPMorgan Chase & Co and Macquarie Group Ltd have been hired to arrange the initial public offerings in Hong Kong as early as the second quarter of next year, said the people, who declined to be identified before a public announcement. The government also plans a mainland share offering, the people said.

The country's securities regulator lifted a moratorium last month on public offerings, imposed in September after the stock market plunged 60 percent. The nation's investment in railway expansion has tripled during December to May this year from a year-ago period since Beijing announced its 4 trillion yuan ($585 billion) stimulus plan in November.

"The government has been planning the rail IPOs for years, waiting for the right time," said Wang Qingyun, head of infrastructure development at the National Development and Reform Commission, in Shanghai on June 25. He declined to give a timetable for the rail IPOs.

The major assets of the holding company will include the existing Shanghai-Beijing rail line and the Shanghai Rail bureau operations, the people said. The high-speed Shanghai-Beijing rail line, which is under construction, will not be included, one of the people said.

"It's the government's basic policy to finance railway construction in various ways including non-government sources," said spokesman Wang Yong Ping. He declined to comment on the timing or amount of any share sale. JPMorgan spokeswoman Marie Cheng and Macquarie spokesman Paul Scanlon declined to comment and CICC spokeswoman Jiang Luyang could not be reached for comment.

China's locomotives haul about a quarter of the global rail traffic on tracks accounting for about 6 percent of the worldwide train network.

Daqin Rail, operator of the biggest coal transport line on the mainland, raised 15 billion yuan in an initial share sale in 2006. The shares rose 27 percent this year, compared with a 61 percent increase in the Shanghai Composite Index.

Bloomberg News

(HK Edition 07/03/2009 page3)