China’s state-owned railway company will spend more than 50 billion yuan ($8.2 billion) in its first large-scale train purchases to meet rising transport demand even as the economy slows, Xinhua News Agency reported.
Newly formed China Railway Corp., which took over train operations from the dismantled Ministry of Railways in March, will buy locomotives, bullet trains and rolling stock, the official news agency said yesterday, citing the company.
The orders come after China’s government pledged last month to speed up rail investment, especially in the nation’s central and western regions, to promote urbanization and help boost economy. The purchases will benefit CSR Corp Ltd. (601766) and China CNR Corp. (601299), the country’s two biggest trainmakers, according to Bank of China International Ltd.
“The long-awaited tender is definitely good news to the two trainmakers,” Xu Minle, a Shanghai-based analyst at the bank, said before the announcement, referring to the tender for bullet trains. “But the trainmakers’ share prices may have already factored this in.”
CSR, which builds high-speed trains itself and in a venture with Bombardier Inc. (BBD/B), climbed 1.3 percent to HK$5.66 in Hong Kong trading as of 9:30 a.m. CNR rose 1.8 percent to 4.46 yuan in Shanghai.
The call for tenders for bullet trains, which Xinhua said the company will make soon, will end a hiatus in place since a 2011 high-speed train crash near the eastern city of Wenzhou that killed 40 people. An official report into the accident said it was caused by mismanagement and signaling-system design flaws.
Cargo delivery by train reversed declines last month, rising by 6.46 million tons from a year earlier to 260 million tons, despite an economic slowdown, according to Xinhua. China will add 5,500 kilometers of new track this year, bringing the total to more than 100,000 kilometers and prompting China Railway to expand capacity, Xinhua said.
China split the Ministry of Railways into two in March as the nation’s new leaders sought to pare bureaucracy and eliminate graft in a department that had more than 2 million employees and 2.8 trillion yuan in debt. Some administrative functions went to the Ministry of Transport’s State Railway Administration and China Railway took over commercial operations.
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