China's State Council has approved the establishment of China Railway Corporation with registered capital of 1.04 trillion yuan ($167.4 billion), following the government's decision to dissolve the Ministry of Railways (MOR), according to a statement posted on the central government's website Thursday.
The Ministry of Finance will fund the setting up of the company, while the Ministry of Transport and the newly established State Railway Administration will supervise its business and performance, the statement said.
The new company will enjoy favorable policies extended to the MOR in the past. New bonds issued to pay for the construction of railways will also be guaranteed by the government, the State Council said.
The new railway company will also take over the assets, debt and employees of the MOR. The government will not ask the new railway company to deliver dividends until the debt problem is solved, according to the statement.
The MOR has faced numerous problems over the past few years, including heavy debts from funding high-speed rail lines, waste and fraud. Its total outstanding debt hit 2.7 trillion yuan at the end of the third quarter of 2012.
The value of the MOR's assets is also much lower than expected, the National Business Daily (NBD) reported Thursday citing industry insiders and railway experts.
The MOR has assets worth 4.3 trillion yuan, according to figures provided by the MOR's auditor.
However, the MOR's assets should be worth at least 20 trillion yuan, given that one kilometer of railway is worth 200 million yuan and the total length of the railways nationwide is 100,000 kilometers, the NBD report said, citing Wang Mengshu, deputy to the National People's Congress and scholar of the Chinese Academy of Engineering.
But the report also cited an unnamed analyst who said that the data for the MOR could not be wrong since the ministry has no reason to undervalue its assets.
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