The Ministry of Railways is finally able to pay off part of its huge creditor list after securing bank loans worth 200 billion yuan (US$31.6 billion).
 

The news comes after the debt-laden ministry was thrown a lifeline of support by the central government in a bid to boost investor confidence.

The ministry has already paid its first batch of debt of 6 billion yuan to the Shanghai-listed CSR Corp, one of the country's largest trainmakers. CSR told Xinhua news agency today it expected to recover all the unpaid money from the ministry by the end of December.

The ministry ended its second quarter deeper in debt than ever, owing creditors a staggering 2.09 trillion yuan, according to an earlier report released by the Shanghai Clearing House.

The report by the interbank clearinghouse said the ministry's debt-to-assets ratio, a gauge of financial health, reached 58.53 percent at the end of the second quarter, reflecting the heavy debt burden incurred by the country's rapid railway expansion.

Over the past months, construction of more than 10,000 kilometers of rail track was halted as funds have dried up, leaving workers without pay, according to media reports citing Wang Mengshu, vice chief engineer of the China Railway Tunnel Group.

The sudden halt came in a tight liquidity environment and followed the deadly July train crash in Wenzhou, Zhejiang Province, which rattled investor confidence and limited the ministry's ability to borrow money or sell bonds.

The ministry has relied heavily on bond sales to finance rail construction. At the end of last month, the ministry announced plans to sell 20 billion yuan of bonds next week.

The ministry's high asset-liability ratio indicated that it was under significant financial pressure, said Ou Guoli, a professor at Beijing Jiaotong University. It would continue the financing, which would lead to more debt, according to Ou.