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Official denies monopoly in expressway projects

By Chen Yang (Global Times)

08:03, June 11, 2012

State-owned coal companies have not monopolized expressway construction projects in North China's Shanxi Province, and the Shanxi provincial government welcomes private investment from home and abroad to help solve the problem of capital shortage in the sector, an official from the local transport department said over the weekend.

Seven State-owned coal enterprises including Shanxi Coking Coal Group and Datong Coal Mining Group are planning to set up subsidiaries and invest a total of 10.5 billion yuan ($1.65 billion) on expressway projects under construction, a move to ensure the progress of construction as scheduled, Duan Jianguo, head of Shanxi Provincial Transport Department, said in a statement posted on the department's website yesterday.

Their investment, together with bank loans totaling 30 billion yuan, would help partly solve the 60 billion yuan capital shortage for the province's expressway construction target of 1,000 kilometers in 2012, according to Duan.

The coal-rich province is speeding up expressway network expansion to relieve transportation pressure and plans to have a total of 6,300 kilometers of expressways by the end of 2015.

But with the central government's move to regulate financing by local government financial vehicles since 2011, the local transportation department is facing increasing funding challenges.

"Investing in commercial expressway projects could help coal companies enlarge their sales channels and expand income sources through toll charges," said Li Chaolin, an industry watcher at China Coal Transportation and Sale Society.

"But the income from operating expressways will depend on the total volume of coal transportation," Li said. "Transportation costs of expressways are higher than that of railways, so price-sensitive clients will prefer railways for transportation," Li said.

Coals transported from Shanxi to other provinces and regions by roads amounted to 120 million tons in 2011, a 25.7 percent year-on-year growth, according to Shanxi coal industry authorities. With the province's rising coal output in the next few years, Duan expects a rapid rise in demand for coal transportation.

However, Zhao Jian, a professor at the School of Economics and Management at Beijing Jiaotong University, said that Shanxi's plan on expressway construction is too aggressive and will bring potential risks. "The move is more likely to boost GDP rather than solve transport problems, and will add debt burdens to road builders and operators."

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