Sichuan to build four intercity railway lines

Southwest China's Sichuan Province plans to establish a local railway company, a move analysts said Tuesday will seek private investment out of the China Railway Corp.

An unnamed source with the Sichuan Development and Reform Commission (SDRC) said there is a possibility of introducing social capital into the new railway company as the Sichuan government requires opening railway construction in the province to social capital, China Business News reported Tuesday. The company will build railway lines to connect four cities in southern Sichuan.

Two officials with the Sichuan Development and Reform Commission (SDRC) refused to comment on the issue when reached by the Global Times Tuesday.

The news comes on the heels of a State Council guideline on opening of the ownership and operation of intercity rail, suburban railway and freight railway to local governments and social capital, issued on August 19.

The company, if successfully established, will boost local governments' enthusiasm in constructing railways, Sun Zhang, a railway professor with Shanghai-based Tongji University, told the Global Times Tuesday.

China plans to build more than 120,000 kilometers of railways by 2020, but with only 98,000 kilometers of tracks completed by the end of 2012, the country needs to construct 3,000 kilometers of railways each year, which requires 500-600 billion yuan of investment, Sun said, noting that capital from China Railway Corp is limited and funding from local governments and social capital needs to be introduced in railway construction.

Moreover, local governments have better knowledge of which railway lines are most needed for local growth and have highest prospect of profitability, Sun said.

In this way, local railway companies with clearly established ownership can be completely separated from the highly indebted China Railway Corp, which is the future direction of the sector, he noted.

Sichuan plans to construct four railway lines connecting Neijiang, Zigong, Yibin and Luzhou in southern part of the province, which are aimed to be completed by 2030, to boost the local economy, local newspaper West China City Daily reported Thursday.

In order to speed up the construction of the intercity railways in the area, the Sichuan government plans to set up the railway company and attract diversified investment for railway construction, the newspaper reported, citing Sichuan vice governor Wang Ning.

Boosted by the central government's encouraging policies, many regions are busy constructing intercity railways, mostly operated by joint-stock intercity railway companies.

Though the intercity railway is intended to boost the local economy, many regions do not have enough traffic to make the routes profitable, Zhao Jian, a professor with Beijing Jiaotong University, told the Global Times Tuesday.

Even the intercity railway connecting Beijing and Tianjin suffers big losses, the intercity railways connecting smaller cities in southern Sichuan are very likely to suffer losses, Zhao warned.

China encourages constructing railways in western regions, but cautious feasibility studies are needed before the launch of the construction, Zhao noted.