Key meeting to open railway construction to private capital

The investment reform in the railway sector adopted at a key meeting of China's State Council will establish a platform for private capital to enter this field.

Referring to the State Council executive meeting held by Premier Li Keqiang, Sun Zhang, a railway professor at Tongji University in Shanghai, told Xinhua, "The meeting made a top-level design for the development of railway sector, solving the biggest problem -- finance."

Reform measures include the setup of a long-awaited railway development fund, more types of railway financing bonds and greater participation of private capital.

"Setting up railway development fund is a win-win solution for both private capital and railway construction," noted Sun, who further explained that, the fund has an interest rate higher than banks, and a guarantee from the government. Thus, it's very attractive to private capital.

According to China's 12th five-year plan, the total mileage of China's railway will exceed 120,000 kilometers, which requires an annual investment of around 600 billion yuan.

Some 350 to 450 billion yuan can be raised through railway development fund and financing bonds, which means the private capital will take up over 50 percent of railway investment, providing a strong support to railway construction, according to Sun.

In 2013, the total investment of railway fixed assets reached 660 billion yuan, including 150 billion yuan of railway bonds and 317 billion yuan of bank loans. The annual interest alone was up to more than 130 billion yuan in 2013.