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MOR misses investment target for first half amid funding crunch

By Wang Xinyuan (Global Times)

08:33, July 16, 2012

China's railway investment in the first half of the year was less than half of the annual target, data from the Ministry of Railways (MOR) showed over the weekend, indicating that the ministry is finding it difficult to attract investment, though the sector is now open to private investors.

The railway's fixed-asset investment totaled 177.8 billion yuan ($27.9billion) in the first half of 2012, including investment for railway construction of 148.7 billion yuan, down 36.1 percent and 38.6 percent respectively from 2011, according to data from the MOR Friday.

Railway investment has cooled down since a train accident in Wenzhou on July 23, 2011, which left 35 dead and hundreds injured.

It is hard to accomplish the annual target of investment in the railway sector unless the central government allocates fiscal revenues, Wang Mengshu, chief engineer of the China Railway Tunnel Group, told the Global Times Sunday.

The full-year target for fixed-asset investment is 500 billion yuan, including 406 billion yuan for railway construction covering 41 high speed projects, according to the MOR. The targets are 12 to 15 percent lower than the actual investments in 2011.

"The railway sector currently is very short of funds," Wang said, noting that some local railway bureaus have debt-asset ratios as high as 80 to 90 percent, and several railway projects have been suspended due to shortage of funds.

The official figures show that the MOR had a debt-asset ratio of 60.62 percent by the end of the first quarter.

To ease the funding pressure, China's policymakers are encouraging the participation of private capital in the sector. However, private investors are hesitant because the high speed railway has struggled to make profit, as high ticket prices have thwarted passengers.

"The MOR needs to balance the structure of its construction," Sun Zhang, a professor at the Urban Rail Transit and Railway Engineering Department of Shanghai-based Tongji University, told the Global Times.

Railway freight transport capacity only meets about one third of China's needs, and the construction of freight railway instead of passenger high speed railway is more important, Sun said.

The high speed railway accounted for 57 percent of new lines laid in 2011, according to the MOR.

Freight railway is profitable and investors, both State and private, can gain returns on their investments, Sun noted.

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