Amidst GDP Slump, China Pours Investment in Railways

By Zhang Xiangdong
Published: 2008-10-30

From News, page 6, issue no. 391 October 27, 2008
Translated by Liu Peng
Original article:

China's cabinet has approved spending an extra RMB 750 billion on the country's railway system over the next two years, thus raising the governments total investment in the sector during the 11th five-year plan from RMB 1.25 to 2 trillion.

The extra investment is intended to spur the economy after China's GDP growth in the first three quarters this year hit a five-year low.

With 1.2 trillion having already been budgeted within the railway system since 2006, the coming two years each would see an average 400 billion-yuan more, equivalent to 3% of total investment in China's fixed assets in 2007.

Wang Yongping, spokesman for the Ministry of Railways (MOR), said there might be even more funds added in the future, and the Ministry was well prepared for new railway projects.

Zhang Hanya, research fellow at the Investment Institute under the National Development and Reform Commission (NDRC), interpreted the move as a measure to stimulate social and corporate investment.

More investment in the railway system meant more demand for cement, steel, cable and machinery, Zhang said, adding that the railway industry is comparable to real estate in this way.

Wang Bin, director of MOR's information services department, said railway construction could not only effectively boost economic growth, but improve the transportation of raw materials like coal and grain across the country.

At present, China was facing an acute transportation capacity shortage, which was mainly to be blamed for regional energy shortages in the first half of this year.

Professor Zhao Jian from the Business Management School of Beijing Jiaotong University said inadequate railway capacity had become an obstacle to China's economic growth.

This past summer, a surge in power generation led to a sharp rise in the demand for the transportation of coal. Leaders of local government went so far as to visit railway agencies in person to find trains to transport coal with, as opposed to using other forms of transportation which were slower and had less capacity.

Buying train tickets during the holidays was still difficult for Chinese though trainsportation speed had increased.

An NDRC official said that China had a well-developed highway system after many years of large investment, but the railway still lagged behind. He added that in 2007, the investment in highway construction was RMB 600 billion, double that in railway.

Part of this had to do with the closed nature of the industry. China's railway system - a state-owned monopoly - had impeded the entry of private capital to the industry, said Zhang. Presently, investment bodies were only limited to government and financial institutions.

Capital from different sources might have a chance to participate in China's railway construction as reforms on railway investment and financing unfolded in the future, said Wang Bin.