$31b stimulus to revive railway

Updated: 2011-11-02 07:21

By Xin Dingding and Wu Yong (China Daily)

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 $31b stimulus to revive railway

Designers working for the CSR Sifang Locomotive and Rolling Stock Co Ltd in Qingdao, East China’s Shandong province, examine a model of the CHR380A train on July 4. LI ZIHENG / XINHUA


BEIJING - The Ministry of Railways is expected to get more than 200 billion yuan ($31 billion) worth of financial support to pay off the dues and avoid liquidity, after lack of cash flow brought most railway projects to a standstill.

Official sources have confirmed that the ministry will get more than 200 billion yuan to pay off bills and continue key railway projects, Xinhua News Agency reported on Tuesday.

CSR Corp Ltd, China's biggest train manufacturer, said in a news release on Tuesday that it has received payment of trade receivables of nearly 6 billion yuan from the Ministry of Railways.

"We expect to receive most of the total account of receivables in November and December as the ministry routinely pays in the fourth quarter," it said.

CSR Chairman Zhao Xiaogang said in the release that he was fully confident of the future of China's railway development.

"The government did not change its mid- and long-term plans for the railway network, although the railways ministry's payment capacity is weak this year, caused by the sluggish global economic environment," he said.

A publicity official with the ministry told China Daily that the State Council, China's Cabinet, has given policy support to the railway sector in the past weeks.

"Right now, the National Development and Reform Commission (NDRC) is heading a study of the issue (of financial support), such as determining the body and form of investment," he said.

Luo Renjian, researcher with the comprehensive transport institute under the NDRC, said that railway projects involved the employment of many migrant workers and the development of suppliers.

"Halting work on railway projects on a large scale for long is not normal, and should be changed," he said.

Wang Mengshu, deputy chief engineer at China Railway Tunnel Group, said earlier that railway projects spanning a total of more than 10,000 kilometers, including 5,400 km of tunnels, have been suspended due to a shortage of funds.

He said many migrant workers have not been paid for six months. Construction companies owe big sums of money to cement and steel suppliers.

Zhao Jian, a professor with Beijing Jiaotong University, said that the 200 billion yuan might just be enough for paying off migrant workers and suppliers.

"Resuming of construction needs more investment," he said.

"And, whether subsequent construction of the high-speed railway projects that are already half completed will be eventually finished following the original designs remains unclear."

A cement factory owner in Dandong city of Liaoning province said that he has not got any news of when he might expect to get paid by railway construction companies.

The owner, who spoke on condition of anonymity, said he supplied cement to the Shenyang-Dandong and Dandong-Dalian high-speed railways, and the contracts were set to bring 10 percent of his company's income.

"According to the contract, the payment for the first batch of products will not be made until the second batch is delivered. But the railway construction (on the two projects) stopped after the Wenzhou train crash in July. They told me their capital chain was broken. They had no money to pay me," he said, refusing to reveal the amount.

"But I still had confidence in railway projects, because I thought it is impossible for the government to just leave the projects half completed," he said.