Regions commence railway construction

New projects will boost local development

Around a dozen railway projects nationwide started construction recently, which analysts said Sunday will drive up a new around of investment and boost the economy.

But the new frenzy in railway construction also aroused concern over the rise of local government debt that has been plaguing China's economy for the last few years.

These projects, which are based in different regions including Northeast China's Heilongjiang and Liaoning provinces, Northwest China's Shaanxi and Gansu provinces and Xinjiang Uyghur Autonomous Region, and Southwest China's Yunnan and Guizhou provinces, were worth around 300 billion yuan ($48.3 billion) in total, based on the data available on the website of China Railway Corporation (CRC), a spinoff from the former Ministry of Railways.

Analysts said it is "a wise move" for China to speed up railway construction, as relatively poor transportation infrastructure and high cost of road transportation are among major obstacles for development of some regions.

"Unlike in the US, China has to rely more on railway transportation than road transportation to boost its economy," Sun Zhang, a railway expert with Tongji University, told the Global Times on Sunday.

CRC raised its fixed-assets investment target to more than 800 billion yuan for 2014, financial news website caixin.com reported in May, citing an announcement made during a company conference held by the national railway operator at the end of April.

This new around of railway construction has been encouraged by the central government's firm determination on railway development.

Chinese Premier Li Keqiang said last week that China's high-speed rail development will boost the country's economic development during an inspection tour of Changsha and Zhuzhou in Central China's Hunan Province on Thursday and Friday.

In April, a State Council meeting chaired by Premier Li decided that China will speed up railway construction in the central and western regions, and approved a financing reform, including a new railway development fund financed by both State and private capital.

And in July last year, the State Council raised the investment in railway construction to 3.3 trillion yuan ($537 billion) from a previous target of 2.8 trillion yuan during the 12th Five-Year Plan (2011-15) period.

"The railway industry will create more business opportunities for local governments, railway-related enterprises and private capital," Sun noted.

Since the first half of this year, officials from the provinces and regions which planned more railway projects have frequently visit related department of CRC, China Times, a Beijing-based newspaper reported Sunday.

The enthusiasm for railway investment among both enterprises and local governments has also raised concerns about worsening their debt problems.

Analysts say the market players should balance the long-term interest and current debt through more effective ways.

CRC reported a loss of 5.92 billion yuan in the first quarter this year, lower than 6.88 billion yuan in the first quarter of 2013.

The growth of China's local government debt has also moderated since June 2013, although the total amount of debt local governments borrowed was still very high, according to a National Audit Office report last month.

The outstanding debt of nine provincial governments and nine city-level governments audited grew by an average 3.79 percent from June 2013 to the March 2014, 7 percentage points down from the average growth rate in the first six months of 2013, the report said.

The amount of money that the nine provinces newly borrowed to repay old debts reached 57.9 billion yuan ($9.3 billion), with 821 million yuan of matured loans yet to be repaid, it said.

"The railway operators should improve their management so as to reduce the operation cost," Luo Renjian, chief researcher at the Institute of Comprehensive Transportation of the National Development and Reform Commission, told the Global Times Sunday.

Luo also noted that "the market players would finally benefit from the railway investments, which will bring stable returns in the long term."