China Focus: Rail investment back on track

A white-collar worker surnamed Shi is among millions of Chinese eagerly awaiting the launch of a high-speed railway linking the cities of Beijing and Wuhan. "The new line will cut travel time from Beijing to Shijiazhuang, my hometown, to just 50 minutes from two-and-a-half hours," Shi said. The railway, which is expected to start operation at the end of December, is part of broader government efforts to build a high-speed passenger rail network by 2015 to tackle gridlock and drive economic growth. Government-led investment has proven to be an effective way to bolster the economy amid slowdowns. In 2009, when the financial crisis raged, the government succeeded in prompting instant and rapid economic growth by introducing massive investment projects. "The country intends to boost economic growth by stepping up investment amid the current slowdown and the rail sector is worth investing in," said Zhao Jian, an economics professor at Peking University. Recent data from the Ministry of Railways supports Zhao's view. During the first 11 months of the year, fixed-asset investment in railways, including railway infrastructure investment and train purchases, totaled 506.97 billion yuan (81.1 billion U.S. dollars), up 3.1 percent year on year, the ministry said Tuesday. After years of explosive growth, railway construction stagnated following a train crash in the city of Wenzhou that left 40 people dead and hundreds injured in July 2011. But the government has picked up the pace in recent months, with railway infrastructure spending surging 142 percent year on year to reach 70.1 billion yuan in November. "Approvals of several inter-city rail projects were the main reason behind the large amount of rail infrastructure investment seen in recent months," said Shen Zhengyuan, an analyst at CIConsulting. The government has approved a series of infrastructure projects worth more than 1 trillion yuan since September to reinvigorate economic growth, which slowed for a seventh straight quarter to 7.4 percent from July to September. Wang Mengshu, an academic at the Chinese Academy of Engineering, said he expects the rail investment boom to continue in 2013. "The government may keep its railway investment target unchanged at 630 billion yuan next year," he said. According to the 12th five-year plan for railway development, China will invest 2.3 trillion yuan in railway infrastructure during the 2011-2015 period. China will have around 120,000 km of railway in operation, including 40,000 km of high-speed railway, by the end of 2015. The country's railway network will feature four east-west lines and four north-south lines by the end of the same year, according to the plan. However, a lack of funds has been a persistent problem for the Ministry of Railways, especially when it is struggling to cope with rising operating costs and mounting debts. The ministry's debt-to-asset ratio climbed to 61.81 percent at the of September, official data showed. The ministry's after-tax losses stood at 8.54 billion yuan during the first nine months of the year, compared with annual profits of 15 million yuan in 2010 and 31 million yuan in 2011, respectively. By the end of September, the ministry's total assets totaled 4.3 trillion yuan and its debts amounted to 2.66 trillion yuan. However, analysts said the ministry's debt levels will drop as the high-speed rail network takes shape. "High-speed rail investment has a long payback period. The high debt-to-asset ratio will fall accordingly after the ministry's high-speed rail projects generate stable returns," according to Shen.