China

China Reforms Railway Construction Investments to Boost Growth, Will Launch Financial Funds for Venture

This article was originally published on April 2, 2014 at 9:01 pm

Summary

  • According to Sina Finance, on April 2, Chinese Premier, Keqiang Li, announced new policies to provide more diversified financing methods for railway construction in China.
  • Li also said that China plans to construct more than 6,600 kilometers of new railway, 1,000 kilometers more than the country constructed last year. Government investments will center on financing construction in Mid- and Western China..

Why It Matters

  • China plans to sell funds to raise money for railway construction and to attract investors in Chinese railroad construction. The size of the funds is estimated to reach between RMB 200 billion and RMB 300 billion annually.
  • China also plans to diversify and expand its railway construction bonds. The country plans to issue railway bonds totaling to RMB 150 billion this year and to implement a preferential rate on investment returns from the amount. New policies also include providing subsidies to railway companies and encouraging banks to invest in railroad construction.
  • Leading railway construction companies may benefit from these policies. Leading railway companies include: Daqin Railway (CH: 601006), Guangshen Railway Co. (CH: 601333/HK: 0525) and China Railway Erju Co. (CH: 600528).