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Railways try to get investors on track

By Wei Tian and Xin Dingding (China Daily)

13:22, May 21, 2012

As the bidding process for railway projects will be brought into line with other public works, to boost transparency, experts have cast doubts on efforts to tackle a private funding shortage facing the sector.

The Ministry of Railways released its second document in three days on Sunday to announce a major revamp in how construction contracts are awarded. A statement released on Friday looked at the challenge of getting investors.

All transaction centers directly under the ministry will be closed with the tendering process instead handled by local trading points for public projects, depending on location or jurisdiction.

The policy is "a significant transformation" in the way bidding for China's railway projects is managed, the document said.

The announcement followed a statement published online by the ministry on Friday that aimed to encourage more private investment. More information on policies, planning and standards will be made public to keep investors better informed, it said.

However, reception to the offer has been cool, largely, say industry insiders, because the profit share being offered is too low.

"Generally speaking, people are interested in investing in railway programs," said Zhou Dewen. "The problem lies in the profits."

Zhou, who is chairman of the Wenzhou Small and Medium-sized Enterprises Development Association, represents a group of wealthy industrialists in East China's Zhejiang province.

The railway authority in Wenzhou, he said, has been negotiating with entrepreneurs but so far the government is offering just 8 percent of the profits.

"Eight percent is not attractive," he said. Railway programs require huge investment, the sector has suffered losses and entrepreneurs are cautious, he said.

According to data released by the ministry, its debt reached 2.43 trillion yuan ($384 billion) by the end of March, with a debt ratio of 60.6 percent.

The ministry also reported a loss of 6.98 billion yuan in the first quarter.

Meanwhile, fixed investment in railways was 89.6 billion yuan, 48.3 percent less than the same period last year.


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