Govt to encourage private investment into railways

China will encourage private investment in the railway industry in order to maintain economic growth and promote domestic consumption this year, according to a statement posted on the central government's website yesterday, quoting Vice Premier Li Keqiang.

Li said the country should speed up implementation of detailed measures to help build a fair market with equal access to encourage private investment in industries that the government dominates, such as railways, finance and energy.

However, experts are not so optimistic about the plan.

"The railway system is still monopolized by the State, which makes it hard for private investment to compete and make a profit," said Luo Renjian, chief researcher at the Institute of Comprehensive Transportation of the National Development and Reform Commission.

Luo said it is a good idea for the government to approve private investment in the industry, but it can't be a major factor in pushing the development of railway construction.

"The Ministry of Railways (MOR) still needs to raise money through issuing bonds and getting loans from banks and investment from local governments," Luo noted.

"Investment in railway construction requires a large amount of money and the period before returns are seen is very long, which makes it hard for private investors to make a profit in the short term," said Wang Mengshu, a professor at the Tunnel and Underground Engineering Research Center at Beijing Jiaotong University.

Construction investment in China's railways declined by 76 percent year-on-year to 8.73 billion yuan ($1.39) in January, according to the Ministry of Railway's website Wednesday.

The shortage of capital for railway construction and the Spring Festival holiday are both factors behind the decline in railway investment in the first month this year, Wang noted.

The current railway construction projects are supported by the 200 billion yuan raised by the MOR through issuing bonds last year. But how much funding the MOR can raise this year is still in doubt, Wang told the Global Times.