Railways ministry struggles with debt (2)

The ministry's press official refused to comment Wednesday.

"The main reason for surging losses in the industry is that the cost of building railways, especially high-speed railways, is too high," Li Lei, an industry analyst with CITIC China Securities, told the Global Times Wednesday.

According to Yu Bangli, chief economist with the ministry, the cost of constructing one kilometer of high-speed railway averages 130 million yuan ($21 million) in China. In comparison, the cost of building the LGV Est high-speed rail network in France was $15 million per kilometer, the European Union announced in 2009.

But Li noted that the relatively weak domestic economy has also played a part in the increasing losses, as railway networks usually rely heavily on cargo transportation for revenue.

Wang Mengshu, a railway expert at the Chinese Academy of Engineering, told the Global Times that because the railway authority needs to borrow a large amount from banks to set up new networks, the ministry's debt problem is unlikely to be solved anytime soon.

To alleviate the debt burden, the ministry and its subsidiaries view issuing bonds as one option for raising funds.

"Although the debts and losses are skyrocketing year by year, the ministry is too big to fail," said the insider, noting that the authority will eventually figure out ways to support railway construction, and default is not a possibility as the ministry can borrow new loans to pay the old ones.

We recommend:
Report on the rich in China released	Sales boosting measures for Spring Festival	1st express sleeper train starts operation
Top 10 most transparent multinational companies	Top Ten Economic Events in 2012	Beijing leads nation on rich list