Investment in railways rises (2)

By the end of 2012, China had 98,000 km of rail network.

This means that a total of 22,000 km of new rail will be built during the 2013-2015 period. And investment in railways infrastructure could reach 1.33 trillion yuan during the period, Shanghai Securities Daily reported.

The split of the ministry is unlikely to affect investment in railways and will help the industry better meet market demand, Railway Minister Sheng Guangzu told reporters at the NPC this week.

"We view the reform positively. We expect it will be easier for China Railway Corp to restructure its assets and debt as an incorporated company rather than the Ministry of Railways, providing increased flexibility to the funding of railway projects," Barclays Plc analysts led by Patrick Xu said in a note to clients.

The previous speculation that the authority would be merged with the transportation ministry also helped to dent the interest rate of the railway bonds, which hit a seven-month low at end of February.

Li Daxiao said bonds issued by the railway ministry are very popular in the market, which potentially could be even expanded, though the 2.66 trillion yuan liability has put the ministry's debt-to-asset ratio at 61.81 percent at the end of September.

"China's bond market is big enough. Financing is not a problem. The problem is if the ministry and the central government have enough willingness to scale up the investment," Li said.

China's railway transportation capacity, both in freight and passengers, is still lagging far behind the economy's demand, Li said.

Expanding its capacity would greatly ease the tension between supply and demand and reduce the cost of logistics, as the cost of train freight is merely one-third of that of the road freight, Li added.