China to invest heavily on railway infrastructure

Key Words: railway; high-speed railway; 12th Five-Year Plan; railway infrastructure

Related Reading:
>> World's longest high-speed rail starts operation
>> Rail ministry responds to price critics
>> Harbin-Dalian high-speed railway starts operation

China's railway infrastructure investment will maintain rapid growth this year, with 600 billion yuan to 630 billion yuan to be invested, several industry insiders said.

According to the 12th Five-Year Plan, China will spend over 1.3 trillion yuan building more than 20,000 kilometers of railways from 2013 to 2015.

Wang Mengshu, an academician of the Chinese Academy of Engineering, said in an interview with Economic Information Daily that the country will spend around 630 billion yuan building railway infrastructure this year.

A senior engineer at the China Railway Construction Corporation said that both the planned railway investment and length of railways to be constructed this year have surpassed that of 2012. Although the national railway work conference is still some time away, most projects the company plans to carry out in 2013 require more investment than those of last year, excluding projects near completion.

China plans to spend 10.7 billion yuan building high-speed railways in Yunnan province this year, of which, 6.7 billion yuan will be invested in the Yun'gui railway, and 4 billion yuan will be invested in the Shanghai-Kunming passenger-dedicated railway. This is much higher than the planned investment of 9.4 billion yuan in 2012.

Railway investment has increased substantially due to related construction plans and increasing construction costs.

"At least 600 billion yuan must be invested on high-speed passenger and coal railways linking provincial capitals in 2013," Wang said.

"The construction costs of railways, particularly high-speed railways, are on a steady rise due to the increasing costs of land acquisition and resettlement, labor, and raw materials."

Furthermore, new railways contain more bridges and tunnels, whose construction costs are extremely high. For example, 75 percent of the Chengdu-Lanzhou Railway is made up of bridges, Wang added.

Wang said that China will launch more railway projects this year. "The institute is busy surveying related areas. Construction will start on railway projects as soon as possible. For example, construction of the Zhengzhou-Chongqing Railway is likely to be started soon."

As the Ministry of Railways (MOR) has amassed debts of more than 2 trillion yuan, financing has become a bottleneck for China's railway construction. Many people are wondering whether the country can allocate more than 600 billion yuan for railway construction this year.

"Securing financing in 2013 is not a problem. Feedback on high-speed railway projects is generally positive, and both central and local governments have reached a broad consensus on accelerating railway construction," Wang said. Furthermore, railways are public goods, but the central government has not allocated enough money for railway construction, leading to a heavy debt burden on the MOR. "The central government, MOR, and local governments should contribute 40 percent, 50 percent, and 10 percent, respectively, to total railway investment."

China spent 516 billion yuan on railway construction last year, an increase of 110 billion yuan from its planned investment of 406 billion yuan. Of the total investment, 40 billion yuan came from the central government, which was rare in the country. Wang said that given the financing problems facing railway projects, the central government may allocate more money for railway infrastructure construction this year.

In addition to seeking greater support from the central government, there are two more important measures to ensure sufficient funds for railway construction. First, the country may expand the levy coverage of the national railway construction fund from state-owned enterprises to all railway transportation enterprises, in order to increase the revenue of the fund. Second, the country may issue 150 billion yuan's worth of railway construction bonds this year.

Read the Chinese version: 今年铁路基建投资将超6000亿
Source: Economic Information; Author: Zhang Bing and Xiao Lin

We recommend:
KFC apologizes for unqualified chicken supply	Li Ka-shing named Hong Kong's richest again	1st individual user of grid-connected PV power
Price cut for 20 types of drugs	Top Ten Economic Events in 2012	Demand for gold rises with diversify reserve holdings