Recently, China has taken the steps to open the door for private investment in the state-monopolized railway sector in a bid to boost the development and On August 23, Shenzhen Zhongji Industrial Co became the ice-breaker by acquiring for 41.8 million yuan (US$5.2 million) 100% of a state-owned railway company, Luoding Railway Group, which maintains a 62.1-kilometer rail line.
Luoding had invested more than 800 million yuan over eight years to build the railway linking two cities in Guangdong province - Luoding and Chunwan. But the company has suffered from persistent losses ever since the railway was put into operation in 2003.
With the acquisition, Shenzhen Zhongji committed to stretch the railway to Cenxi within three years.
Last year, Changshan Cement Co put money into the construction of Quchang Railway in Zhejiang province. The cement company, however, transferred or resold almost half of its total 34% stake in the railway to Shanghai Railway Bureau and state-owned Zhejiang Railway Investment Group just one week before the Zhongji deal was signed.
This is one element of a long-term development plan that will see China expand its railway network to 100,000km by 2020 from the current 74,408km. The expansion would require a total investment of 2 trillion yuan through 2020, with an average annual input of 100 billion. The investment will be front-loaded with the average annual investment estimated at 160 billion yuan up to 2010.
China's investment on railway construction exceeded 100 billion yuan in 2005, almost double the 51.6 billion yuan expended in 2004. Railway construction was further accelerated in the first half of 2006 with investment for the first five months amounting to 74.5 billion yuan.
And this year, the Railway Ministry has set a goal of investing 163.3 billion yuan in railway construction across the country. However, the investment in the first eight months of this year totaled just 82.2 billion, fulfilling only 50.4% of this year's target. That means that in the remaining four months, the country needs to pump more than 80 billion yuan of into rail development, which is certainly not an easy job.
The government wants to boost rail transport because it consumes less fuel than motor-vehicle and air transportation. To implement its ambitious plan, the government decided to allow private companies to invest in railway construction, running railways, and manufacture of railway equipment. In April, it further liberalized the designing, project construction and supervision businesses in the railway industry.
On August 26, three days after the inking of Zhongji's deal, a German company, Business Media China, announced that it had obtained exclusive operation rights for outdoor advertising in railway stations from China Railway Century Media, becoming the first foreign company to get a piece of this business. The German company will handle outdoor advertisements at Beijing West Railway Station, Beijing Central Railway Station, Tianjin Railway Station and Shijiazhuang Station for six years.
The major obstacles facing private investors are pricing and dispatching. So far, railway-transport prices and train-dispatching schedules are set by the government. Such official intervention will undermine the operating ability of a private company, increasing investment risks.
For example, Sichuan province set the transport price for a local offshoot railway at four times that of the trunk line in a bid to attract private investment. The "favorable" price to investors, however, makes the company less competitive in the market.
Source:佚名