BEIJING May 21 China's railway industry will
open to private investment on an unprecedented scale, according
to a document issued this weekend by the Ministry of Railways,
which is struggling with mounting debts and a corruption scandal
while attempting to resolve the country's infrastructure
Private investors will be encouraged to bid for contracts,
subsidiaries will be allowed to list shares, and pension funds
welcomed to invest in railway companies, the ministry said in a
policy document issued late Friday.
The document did not address allowing foreign firms to
invest directly in rail. While foreign companies such as Alstom
, GE, Bombadier and Kawasaki Heavy
Industries have won lucrative tenders to supply China's
rail expansion, in many cases their participation has been
limited to supplying components.
Many foreign firms have also complained that they have been
forced to transfer technology to win contracts only to see China
compete against them in international rail tenders.
The announcement follows Chinese officials' statements
during the annual parliamentary session that rail would be one
of seven industries allowed to open for private investment.
The need for funding is acute. China still needs billions
more in rail investment, to remove bottlenecks in cargo
transport, ease overcrowding in passenger transport and develop
commuter lines in its sprawling megacities.
The ministry lost $1.1 billion in the first quarter of this
year, due to high operating costs and debt payments. It had $384
billion in debt at the end of March.
Rail investment slowed in early 2011 after a fatal crash and
the firing of the minister and some of the ministry's senior
Analysts expect investment to pick up in the second half of
The document specifically called for encouraging private
investment in Chinese rail projects overseas. To date, showcase
projects such as a Chinese-built railroad to Mecca have
struggled with uncontrolled cost increases.
China's Ministry of Railways is the only central government
bureaucracy that has never been restructured in more than six
decades of Communist rule. In addition to a vast and growing
rail network, it maintains its own hospitals, courts, police
force and schools.
China began to face difficulties funding rail expansion,
including high-speed lines, after costs blew out on a
politically-mandated, high-altitude track to Tibet. In 2006, the
ministry listed two lines in Hong Kong and began issuing bonds.