China Rail Proposal Said to Seek Up to $584 Billion in New Track

  • Draft plan faces debate given China Railway Corp.'s debt load
  • China's legislature will consider final plan next March

China’s railway administration has advocated keeping up the torrid pace of railway construction with a proposal for the government to spend as much as 3.8 trillion yuan ($584 billion) for new track through 2020, said people with knowledge of the matter.

The proposal is one of several under consideration as the country weighs competing desires both to build out its railway network -- now the second biggest in the world -- and to rein in the debt that helped pay for the expansion. The state-owned monopoly that operates China’s rail system, for example, has 4 trillion yuan in outstanding debt.

The National Railway Administration proposed spending 3.5 trillion yuan to 3.8 trillion yuan to build 30,000 kilometers of track through 2020, said the people, who asked not to be identified because the discussions are private. That compares to the 3.58 trillion yuan the government spent for a similar amount of track in the last five-year plan, from 2011 to 2015. Planners believe China must continue expanding the network because it lags developed countries in terms of mileage per capita, said one of the people. 

The final budget will involve input from several government agencies and could be significantly higher than the railway administration’s proposed figures, two of the people said. They said another group involved in the discussions is concerned the budget is too high and ought to be much lower given China Railway Corp.’s debt load.

Under the administration plan, the government would accelerate reform of state-owned rail companies, one of the people said, without elaborating. That’s part of an effort to streamline the state-owned sector and create national champions that can compete globally. 

Last May, China CNR Corp. and CSR Corp. merged to create CRRC Corp., a train-equipment maker that dwarfs Europe’s Siemens AG and Alstom SA. A similar merger was approved last month for two of China’s largest state-owned shipping groups.

Caixin magazine reported on the National Railway Administration’s draft plan earlier Monday, saying the final budget could exceed 4 trillion yuan. One of the people said the administration submitted the plan to China’s Ministry of Transport in September, and the final plan must be approved at the annual meeting of China’s legislature in March. The administration and the ministry didn’t immediately respond to faxed requests for comment.

China’s total rail network was due to hit 120,000 kilometers by the end of 2015, the country’s top economic planning body said last August.

— With assistance by Keith Zhai, and Steven Yang

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