In response to growing concerns about whether the high-speed railway boom will slow China's economic growth, Yu Bangli, chief economist of the Ministry of Railways (MOR) said in a recent press conference that China has adequate funds to finance large-scale high-speed railway construction and will not face a related debt crisis.
Instead of slowing economic growth, high-speed railways will drive it, Yu said. The construction and operation of high-speed railways has injected new fuel into China's economy. They have not only brought the urban economy convenience and efficiency but also promoted the flow of human resources, technology and capital.
Yu said that to evaluate the operating results of high-speed railway projects, it is important to not only assess the profits of one railway line or project but also the comprehensive benefits of the railway line or project.
High-speed railways have produced the "one-city effect" between some cities, helped increase freight capacity of some railway lines, promoted the unity of the domestic market and will possibly tackle the issues related to the coordinated development of different domestic regions.
The debt-to-asset ratio of railway enterprises stands at 56 percent
China's railway minister Sheng Guangzu said during the "Two Sessions," held last March, "It is normal to incur debts when funding the development of railway projects. The current debt level is within the safe range, about which the public can feel assured."
Sheng said that China's railway enterprises had 3.3 trillion yuan in total assets and 1.8 trillion yuan in debts at the end of 2010, with a debt-to-asset ratio of about 56 percent. "This ratio is relatively low among industrial enterprises," he said.
The report shows that the MOR issued three 10-billion-yuan short-term bonds since the start of 2011. In regards to the purpose of raising funds, Sheng said the funds will be used for railway construction and operation.
Xie Xuren, minister of finance, also said the overall debt level of China's railways, which is lower than the debt level of many foreign railway corporations, is safe, reasonable and controllable,.
160 billion yuan of private capital to be invested in railways
According to sources, the MOR has arranged 700 billion yuan of investments for railway construction to launch 70 new projects, including 15 high-speed railway projects in 2011. "We are confident in ensuring railway construction funds through various methods," said Wang Yongping, spokesperson for the MOR.
In regards to the current deficit of high-speed railways, Yu believes high-speed railways need four to seven years to realize profits. The high-speed railway in western China may see a deficit in the short term just like common railways.
However, from the perspective of promoting western development and coordinated regional economic development, the MOR has made a reasonable financial arrangement to avoid financial risks. China has a huge population, and its urbanization is also rapidly advancing. The sustained, steady and rapid economic development situation will allow high-speed railways to achieve a sustainable positive development through marketing.
