Chinese private capital invests in cross-border railway

A 56-kilometer-long cross-border railway linking Hulin, a city in China's northernmost Heilongjiang Province, and Lesozavodsk in far eastern Russia, will become the first cross-border railway to be funded partly by Chinese private capital.

The Xinrong Investment Co., Ltd., based in Dalian, a coastal city of northeast China's Liaoning Province, will invest approximately 230 million yuan (27.81 million US dollars) in the railway project, while its Russian counterpart, Evrazholding, a privately-run steel giant of Russia, will provide some 30 million US dollars. Construction on the railway is scheduled to begin at the end of June this year.

"The railway is expected to ease the transportation tensions that hinder Sino-Russian trade. It is also a significant signal in Sino-Russian trade and economic cooperation," said Song Kui, head of the Northeast Asia Research Institute under the Heilongjiang Provincial Academy of Social Sciences.

"It is the first time that Chinese private capital funds the construction of cross-border rail route, a sector which had long been monopolized by the state economy," Song said.

According to an agreement signed this month, the Chinese company will be responsible for building a 36-km section of the railway from Hulin to the Sino-Russian border. Its Russian counterpart will build a 20-km section from Lesozavodsk to the border, where the two sides will jointly build a bridge spanning the 40-meter-wide Song'acha River to link the railway together.

The State Council, or the central government, issued a circular early this year supporting non-state investment in infrastructure, monopolized industries and public utilities. This is the first time that the Chinese government has made a clear statement giving the green light for non-state capital to enter industries monopolized by the state economy.

Encouraged and supported by government policies, private businesses have began investing in some fields in the Sino-Russian trade formerly monopolized by the state economy, such as the Dongning International Helocopter Airport, which is being built with private funds in the province.

Both China and Russia have exerted great efforts to explore more channels to promote bilateral trade and economic cooperation as well as exchanges in other fields. However, due to financial difficulties, some plans have not been implemented and lack of traffic facilities have created a bottleneck slowing the trade between the two countries.

The entry of private capital will undoubtedly help ease the traffic tension, Song said.

Heilongjiang Governor Zhang Zuoji said that his provincial government will encourage and support private companies to participate in the monopolized sectors and will improve the financial service for private businesses.

In fact, private businesses have been active in Sino-Russian trade in border areas since the 1990s.

In 2004, trade volume between China's Heilongjiang Province and Russia reached 3.82 billion US dollars, accounting for 18.8 percent of the overall trade between the two countries. According to statistics from the Heilongjiang Provincial Commerce Department, 77 percent of the trade volume between Heilongjiang and Russia in the year came from private companies and the top ten trading firms are all private businesses.

"Generally speaking, private businesses mainly did barter trade in the past, so it is necessary and wise for the government to encourage and support private businesses to invest in 'monopolized zones.' This will help promote the strategic upgrading of Sino- Russian trade," Song said.

Wang Weixin, chairman of the Dalian Xinrong Investment Co., Ltd. , said: "As a businessman, I care for the economic returns. But from a strategic point of view, Sino-Russian trade has a promising future and I think construction of the railway is required by both countries."

Source: Xinhua