Premier Li points way for railways reform (2)

China Railway Corp still faces uncertainties, as its financial report in the first quarter showed it has debts of more than 2.8 trillion yuan ($456 billion), which are rising each month.

Under the development plan drawn up by the former railways ministry, 5,200 km of track was to be completed this year, with a fixed-asset investment of 650 billion yuan. But only one-third of the investment was made in the first half of the year.

Luo Renjian, a researcher at the Institute of Transportation Research under the National Development and Reform Commission, said the slower pace of railway construction in the first six months is due to seasonal factors. It will pick up later this year and in the remaining years of the 12th Five-Year Plan (2011-15).

"Total railway investment this year will be 690 billion yuan, slightly higher than budget," he said, adding that about half of the funding will come from bank loans, with local governments and private investors spending about 90 billion yuan.

Other major funding sources include the railway development fund, income from car purchase tax, financial support from the central government, while the China Railway Corp will be responsible for providing 23 billion yuan, he said. "All funding is guaranteed."

Combined railway investment in 2014 and 2015 will be 1.4 trillion yuan under the National Development and Reform Commission's plan, he said, adding that the overall distance covered by the nation's railway system will be 123,000 km by 2020, about 3,000 km more than scheduled.

The central government is encouraging the start of new rail projects, especially in western areas where there is more room for development, instead of just focusing on existing ones, Luo said.

Wang Mengshu, deputy chief engineer of the China Railway Tunnel Group and a member of the Chinese Academy of Engineering, said the China Railway Corp has been less aggressive in construction after the March reform.

But the central government will still be responsible for the majority of funding for future investment, Wang said, as private investors are not yet convinced that they should chip in and investment in western areas is not profitable in the short term.

Xin Dingding and Cui Jia contributed to this story.

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