China¡¯s railways welcome foreign investors on board

Over the next year or so China is expected finally to phase out its steam engines. By 2020, China wants to have 100,000km of rail lines, up from 74,000km now. It also wants to ensure that more than half of those lines are double track, up from 40%, and that the proportion electrified is raised from 30% to more than 50%. It will probably cost RMB2,000 billion.

Huang Min, chief economist at the Ministry of Railways said, ‘It will be difficult to rely completely on government funding for these projects.’

Help will be sought from private and foreign investors. It needs the investment. Huang Min said the rail network is only able to meet 35% of demand, forcing customers to use more expensive and polluting along distance trucks.

But while China is now opening the door to overseas investment, will foreigners be keen to come up with the needed funds?

A key obstacle is the Railway Ministry’s dual role as controller of the network and policymaker, which contributes to a lack of regulatory clarity and vulnerability to bureaucratic whim. Even if technically independent, private lines will remain dependent on official favor. Huang Min also admits that local governments will play a role in talks to decide prices.

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