Investors - APRIL 22, 2014

China to accelerate railway investment

by Drew Campbell

In the first week of April, the State Council of China announced it is accelerating railway investments in the country’s central and western regions and has set up a railway development fund to expand funding sources, according to a report by Moody’s Investors Service. The State Council plans to attract private investments for the fund, and will issue bonds of 150 billion yuan ($24.2 billion) for projects.

State-owned China Railway Construction Corp., which operates the country’s railway systems, will be “the main beneficiary of the government’s plan to increase railway investments, given its dominant position in the domestic railway construction industry,” says Chenyi Lu, a Moody’s vice president and senior analyst. Moody’s notes CRCC owns about 50 percent market share in the oligopolistic railway construction industry. It expects CRCC’s revenue to increase by around 10 percent year-on-year during the next one to two years, given its large order backlog at the end of 2013, and the expectation that strong spending on railway construction and infrastructure in China will continue in 2014.

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