The Ministry of Railways is expected to take a stake of around
35 percent in a new investment group to finance the
Beijing-Shanghai high-speed railway, sources said.
The ministry will invest 40 billion yuan in the firm, which is
expected to be established before the end of the year, the sources
said.
Five institutional investors - Bank of China, the Industrial and
Commercial Bank of China, China Construction Bank, the National
Council for Social Security Fund and a foreign private equity fund
-will invest 10 billion yuan each for a total stake of about 45
percent in the new firm, the Beijing-Shanghai High-Speed Railway
Corp.
The local governments of Beijing, Shanghai and Tianjiin
municipalities and Hebei, Shandong, Anhui and Jiangsu provinces
will inject 20 billion yuan in cash.
The ministry said previously the high-speed railway would cost
about 130 billion yuan, but has already upgraded that figure to
more than 170 billion yuan due to surging real estate prices and
resettlement costs, according to media reports.
But industry observers predict the eventual cost will be higher
- more than 200 billion yuan - given rising raw material and labor
costs.
The Beijing-Shanghai High-Speed Railway Corp will have
registered capital of 110 billion yuan.
Industry sources said the government plans to raise another 110
billion yuan through bank loans and bond issues.
The State Council last month approved a feasibility study on the
Beijing-Shanghai high-speed railway, which was proposed nearly a
decade ago.
The State Council yesterday issued a notice saying it has set up
an office headed by Vice-Premier Zeng Peiyan to oversee
construction of the railway.
Industry sources said the country's three major insurers, China
Life Insurance Co Ltd, Ping An Insurance (Group) Co of China Ltd
and the People's Insurance Co of China, have also approached the
ministry about a stake in the investment vehicle.
But negotiations were stalled over concerns about return on
investment.
The 1,318-km project could be the most profitable railway in
China, said Long Hua, an analyst with Haitong Securities.
The railway currently running between Beijing and Shanghai,
which usually takes 10 hours, is already the busiest line in China,
accounting for 10.2 percent of the nation's passenger transport
volume.
The high-speed link could shorten travel time to about five
hours, with a peak speed of 350 km.
The fare for a one-way trip is expected to cost 600 to 700 yuan
- far less than the standard airfare of more than 1,200 yuan.
Long estimates it could be 10 years after the railway goes into
commercial operation before a full return on investment is
seen.
(China Daily October 31, 2007)
