The Ministry of Railways is planning to issue railway construction bonds worth 40 billion yuan (5 billion U.S. dollars) this year.

Sources with the ministry Friday told the Shanghai Securities News that the scheme had been submitted to the central government for final approval.

Analysts say, if successful, this will be the largest railway bond issue since China launched this kind of bond in 1995.

During the 11th Five-year Plan period (2006-2010), China will need a total of 1.5 trillion yuan for railway construction.

A bond issue is a more convenient means of raising railway construction funds, said the newspaper, than other types of financing such as a public offering, equity investment, foreign investment or investment by social security funds.

The bond term, interest rate and major underwriters are yet to be decided, but it is certain that all the funds raised will be used for railway construction, according to a ministry insider.

Railway bonds provide a higher interest rate than other corporate bonds and a relatively low investment risk, Li Lei, a CITIC Group analyst said.

Since 1995, the ministry has issued 14 railway bonds, raising 28.662 billion yuan.

Three types of railway bonds are currently traded in the securities bourse, and two are traded in the inter-bank market.

The ministry is pushing ahead with the issue of both long-term and short-term bonds, the newspaper said.

Daqin Railways, the first Chinese railway listed on the mainland stock market, in July launched its initial public offering (IPO) and raised about 15 billion yuan through an issue of shares.

Source: Xinhua