Asia
the private sector will be encouraged to invest in commercial railways. Nevertheless, construction work has halted and no new projects have been launched in the last three months. Work is expected to resume soon and priority will be given to ongoing projects scheduled for completion this year, sources say.
MOR had no difficulty in obtaining bank loans because of its governmental status, whereas now banks will think twice before lending to CRC. Diversified financing might be a solution. Local governments are expected to take the lead in railway construction in the future. While the main lines are reserved for state players, private and foreign capital will be encouraged for investment in feeder lines. Although this policy was introduced several years ago, so far no successful cases of non-government investment in railway construction have been reported.
Noticing that the United States has a rail network of 272,000km for a population of around 314 million people, the Chinese government has announced a long-term goal of expanding the network to 280,000km by the end of 2050. According to MOR’s annual report, total debts amounted to Yuan 2.66 trillion by the end of 2012. The debt breaks down to Yuan 759.1bn of bonds, Yuan 14bn of foreign loans, and about Yuan 1.4 trillion of loans from domestic
“Reform is justified if it is beneficial to the people and helpful to boosting national strength. Otherwise, there
should be no reform.” Wang Mengshu
financial institutions. With the exception of the Qinghai -
Tibet railway, which cost Yuan 40bn and was financed by the government, all other railways built since 1949 were funded by MOR through loans. MOR was said to pay Yuan 100bn in interest a year. As CRC inherits MOR’s assets and debts, the debt will be a great burden on the new business. A variety of proposals have been put
forward to help CRC reduce its huge debt pile. Wang Mengshu says the state government should write off part of CRC’s debt as non-performing bank loans, because a considerable portion of MOR’s services in the past were provided free in the national interest. There seems to be a consensus that a dividing line should be drawn between the old and new debts, and the government should come up with a reasonable method to relieve CRC of the debts inherited from MOR. In future, CRC should only be responsible for the new debts it incurs.
The government has promised to find an appropriate way to settle the debt issue, but no decision has been announced yet. For the time being, it is clear that the government will continue to support CRC, as it did with MOR. Over time, the state will give CRC
“great support,” says Mr Wang Feng, deputy director of the State Commission Office for Public Sector Reform, the government department that formulated the reform plan. As if responding to Wang Mengshu’s concerns, Sheng Guangzu says in future only the government or social investors will invest in socially-necessary railways. CRC is an enterprise now and will follow the market and seek economic benefits.
The government is studying the
introduction of a subsidy for socially- necessary rail services. Losses incurred from the carriage of students, disabled military personnel and agricultural products at very low rates, and operations on the Qinghai - Tibet and Southern Xinjiang lines are likely to be compensated for by the state. The government has promised not to put a levy on CRC’s earnings from state assets before the historic debts are cleared, while CRC will be allowed to enjoy the tax breaks formerly applied to MOR, and other government- favourable railway policies. The government has reiterated that it backs the issuance of a railway construction bond.
China’s rapidly-expanding fleet of high-speed trains will now be operated according to stricter commercial criteria.
20
These developments augur well for the new railway corporation. Indeed, it should not be difficult for CRC to pay
IRJ August 2013
Photo: Xinhua
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52