Investors key for railway reform

The railway administration’s proposal to make money through developing real estate along the railway to ease its financial pressure takes market reform of the railway sector in the wrong direction. The authority only wants to attract new investment, rather than delegating its powers and promoting market competition, says an article of the 21st Century Business Herald. Excerpts:

The debt-laden State-owned China Railway Corporation, which was separated from the former Ministry of Railways after the ministry’s head, Liu Zhijun, was sentenced to life imprisonment for abuse of power and corruption, should think more practically of the difficulties the new proposal could create.

The poor management and bureaucracy of the Chinese railway system deter private investors. Who will provide the huge startup funds to develop the land along the railways out of the city areas?

Local governments usually regard the areas around newly built high-speed railway stations as new growth points for local economies far from downtowns areas.

The fundamental cause for the financial difficulties of China’s railway sector is the lack of private investors in its core business, railway construction and management.

The China Railway Corporation should implement a stockholding system in the construction and management of some railways. Developing the land along the railway is the second step after the first step is done.

Otherwise, real estate development projects along the railways can further break private investors’ confidence with the railway corporation and make the corporation’s debt issue even worse.