CRH (China Railway High-Speed) trains are cleaned at the new Wuhan Railway Station in Wuhan, China, on Tuesday, Feb. 2, 2010. [CFP]

She Minhua, a Shanghai-based banking analyst at Haitong Securities, said that investing in the high-profile railway operator would bring decent returns to BOC thanks to the robust and sustainable growth potential of China's railway industry.

However, She said he did not believe it was a long-term business development plan because it was very different from the lender's main financial business. "Chinese banks are currently in dire need of capital to fund their main business expansion. Using hard-earned public funds to invest in non-core businesses might not be a reasonable choice," he said.

Bank of China said in February that it would issue 40 billion yuan convertible bonds and might issue up to 20 percent of its existing H shares in Hong Kong to bolster its strained balance sheets following a record lending book expansion of more than 50 percent last year.

Railway construction in China was largely funded by bonds issued by the Ministry of Railway and national funds. Ping An Asset Management Ltd and the national social security fund respectively owned 13.9 percent and 8.7 percent of the Beijing-Shanghai High-Speed Railway Corp as the second and third largest shareholders.

Under the country's frantic railway boom, especially pushed by the giant stimulus package last year, the Ministry of Railways is mulling whether to expand its capital raising avenues to fund railway projects nationwide.

Sources indicated earlier this month that the Beijing-Shanghai High-Speed Railway Corp was applying for top policymakers' approval on its initial public offering, which could raise up to 50 billion yuan to fund the construction.

Work on the high-speed railway between Beijing and Shanghai has a planned investment of 220.9 billion yuan and is scheduled to be operational by 2012. So far, nearly 122.4 billion yuan has been invested in the project.