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Rail construction funding to be trimmed
By Richard Fu |
December 24, 2011, Saturday
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Print Edition
Print Edition
CHINA plans to further cut spending on railway construction next year amid concerns about the sector's mounting debt and safety issues.
The Ministry of Railways has earmarked 400 billion yuan (US$63 billion) for railway infrastructure construction for 2012, Minister Sheng Guangzu said yesterday. That compared with an expected expenditure of 469 billion yuan this year and 700 billion yuan spent in 2010.
China has reined in rail expansion and reduced the speed of bullet trains after the July 23 crash in Wenzhou sparked public fury. The accident, which killed 40 people, deterred investor confidence in the rail sector, reducing the ministry's borrowing ability and forcing Shanghai-listed leading train maker CSR Corp to cut its fund-raising plan.
But Sheng, speaking at a national railway work conference, said rapid railway development should be maintained, as it plays a key role in the country's social and economic development, especially in boosting domestic demand, Xinhua news agency reported.
The ministry will put 6,366 kilometers of new train lines into use in 2012, he said.
The rail ministry, which acts like a corporation in the bond market, holds more than 2 trillion yuan worth of debt, a huge level that had raised concern about the ministry's ability to have them repaid.
Railway construction has been almost halted since the July crash, Xinhua said, amid a tight liquidity environment and the fallout from the crash. But in the fourth quarter, the funding pressure appeared to be easing for the ministry as it has secured more than 200 billion yuan in financial support from state banks and sold 20 billion yuan worth of bonds. That came as the government cut taxes for buyers of the railway bonds to support the cash-strapped sector.
Sheng also said the ministry will actively seek investment from local governments and the private sector to diversify funding channels.
The World Bank said this week that China's railway sector needs a more market-based approach to pricing for both passenger and freight services.
"China has by far the most densely trafficked railway network in the world, but its pricing approach has not kept pace," said Gerald Ollivier, a Beijing-based senior infrastructure specialist with the World Bank.
While the top priority should be to keep prices affordable, offering passengers choices from a broader range of prices could be considered to encourage more people to travel on trains that are under-utilized, leading to increased revenues without increasing the average ticket price. The bank said changes to the system could help China's rail sector not only boost consumer demand, making the system more convenient and affordable, but increase railway revenue to help meet costs of expanding the system.
The Ministry of Railways has earmarked 400 billion yuan (US$63 billion) for railway infrastructure construction for 2012, Minister Sheng Guangzu said yesterday. That compared with an expected expenditure of 469 billion yuan this year and 700 billion yuan spent in 2010.
China has reined in rail expansion and reduced the speed of bullet trains after the July 23 crash in Wenzhou sparked public fury. The accident, which killed 40 people, deterred investor confidence in the rail sector, reducing the ministry's borrowing ability and forcing Shanghai-listed leading train maker CSR Corp to cut its fund-raising plan.
But Sheng, speaking at a national railway work conference, said rapid railway development should be maintained, as it plays a key role in the country's social and economic development, especially in boosting domestic demand, Xinhua news agency reported.
The ministry will put 6,366 kilometers of new train lines into use in 2012, he said.
The rail ministry, which acts like a corporation in the bond market, holds more than 2 trillion yuan worth of debt, a huge level that had raised concern about the ministry's ability to have them repaid.
Railway construction has been almost halted since the July crash, Xinhua said, amid a tight liquidity environment and the fallout from the crash. But in the fourth quarter, the funding pressure appeared to be easing for the ministry as it has secured more than 200 billion yuan in financial support from state banks and sold 20 billion yuan worth of bonds. That came as the government cut taxes for buyers of the railway bonds to support the cash-strapped sector.
Sheng also said the ministry will actively seek investment from local governments and the private sector to diversify funding channels.
The World Bank said this week that China's railway sector needs a more market-based approach to pricing for both passenger and freight services.
"China has by far the most densely trafficked railway network in the world, but its pricing approach has not kept pace," said Gerald Ollivier, a Beijing-based senior infrastructure specialist with the World Bank.
While the top priority should be to keep prices affordable, offering passengers choices from a broader range of prices could be considered to encourage more people to travel on trains that are under-utilized, leading to increased revenues without increasing the average ticket price. The bank said changes to the system could help China's rail sector not only boost consumer demand, making the system more convenient and affordable, but increase railway revenue to help meet costs of expanding the system.
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