China to attract private investment in railway fund

BEIJING, July 8 Tue Jul 8, 2014 5:31am EDT

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BEIJING, July 8 (Reuters) - China will provide the initial money for a railway fund, which will be open to private investors to help better finance the sector's expansion, according to rules published on Tuesday.

Under the rules drafted by the National Development and Reform Commission, Ministry of Finance and Ministry of Transport, the government will provide the initial capital through China Railway Corp, with the rest coming from private investors.

No details on the initial investment were given.

At least 70 percent of the fund would be invested in railway projects, with the rest invested in land development and other higher-yielding projects, according to the rules.

The national railway operator will be responsible for generating "reasonable returns" for investors.

The fund will be managed by a new company, which will be allowed to issue short-term bonds and borrow from banks to maintain cash flow, but barred from providing guarantees and trading futures and financial derivatives.

In April, the government said it would create a fund worth 200 billion yuan to 300 billion yuan ($32-$48 billion) each year, as part of its policy measures to support the slowing economy.

China Railway Corp has said it would raise its annual investment by 20 billion yuan to 720 billion yuan in 2014 to increase the number of lines it plans to build.

The railway sector is burdened by mounting debt due to state-led investments in the past, prompting the government to reform the financing model by attracting private investment.

($1 = 6.2010 Chinese yuan) (Reporting by Kevin Yao; Editing by Jacqueline Wong)

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