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Railways seeking overseas investment
(China Daily) Updated:2005-09-21 09:13

  China's once-monopolized railway sector is riding the rails of market-opening reform, as it strives to attract overseas capital investment.

  "Foreign enterprises are in talks with domestic railway companies on investment," Huang Min, chief economist of the Ministry of Railways, told China Daily yesterday.

  The negotiations are expected to bear fruit soon, Huang said, but would not reveal details of the parties involved, citing business confidentiality.

  According to industry insiders, this means the sector will open more widely to foreign capital, though overseas investors will not be allowed controlling interests on the operation of trunk lines.

  In July, the Ministry of Railways released guidelines encouraging private and foreign capital in railway construction and operation.

  At least 100 billion yuan (US$12.3 billion) is needed annually to expand the rail network from the current 73,000 kilometres to the planned 100,000 kilometres by 2020, according to the national plan.

  Although the sector has been gradually opening to non-government funding, investors have been slow in responding to the government's policies.

  Only a very small amount of non-State capital has been injected into the sector in recent years - less than 1 per cent of the total.

  The central government's rail construction fund is the main source of capital for expanding the network, accounting for more than 90 per cent of the total. The rest comes from local governments and loans from the China Development Bank.

  One of the main reasons for the lukewarm response from private investors is profit guarantees, said Wang Qingyun, director of the transport department of the National Development and Reform Commission.

  Wang made the remarks while addressing the two-day China Railway Investment and Financing Reform Forum, which opened in Beijing yesterday.

  "Favourable policies must be worked out to boost investor confidence," Wang said.

  Meanwhile, a fair and transparent ticketing system must be set up to allow investors to decide prices, he added. The existing fare system does not allow for price fluctuations in line with market changes, which raises investor concerns about adequate returns.



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