China to test relaxation of railway freight rate controls

BEIJING, April 2 Wed Apr 2, 2014 2:26am EDT

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BEIJING, April 2 (Reuters) - China will allow market forces to determine rail freight prices for the first time, the country's top economic planning body said.

The National Development and Reform Commission announced that freight rates for Zhunchi Railway will be determined by the carrier, its clients and investors, according to a notice published on the regulator's website Tuesday.

The 180-kilometre railway, which links a major coal producing region between Inner Mongolia and Shanxi province, is expected to start service by June. It is being built by state-owned mining and energy company Shenhua Group Corp.

Zhunchi Railway will be the first attempt by China to loosen its railroad transport rate controls, the notice said.

Beijing is gradually modifying price controls and allowing market forces to determine transportation rates. Last November, country's aviation regulator removed the floor on domestic ticket prices, allowing carriers to charge as little as they wanted on some domestic routes.

China Shenhua Energy Company Limited <1088.HK 601088.SS>, a subsidiary of Shenhua Group, holds an 85 percent stake in Shenhua Zhunchi Railway Company Limited.

The company expects to invest 50.38 billion yuan ($8.12 billion) mainly in construction of Zhunchi and Huangda railways, along with other acquisitions.

Total investment in the railway may reach 13.46 billion yuan ($2.17 billion) and the transport capacity is expected to reach 200 million tons per year. ($1 = 6.2069 Chinese Yuan) (Reporting By Matthew Millerl Editing by Kim Coghill)

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