Guangshen debuts on Shanghai bourse, marking diversified finance channel for Chinese railways

The Guangshen Railway Company Limited started to be listed earlier Friday on the Shanghai Stock Exchange, becoming the second railway company to issue A-shares on the mainland after Daqin.

As the only railway company listed in Hong Kong and New York, Guangshen Railway mainly operates the passenger and cargo railway transport business between southeast Chinese city Guangzhou and Shenzhen.

The Daqin railway company is the operator of northern China's major coal transportation railway line.

More railway companies with good profits will be selected to get listed, said Huang Min, chief economist of the Ministry of Railways.

The government will also offer foreign investors with opportunities to hold some shares in the national railways and majority or even all shares in the local ones, he said.

An operating mileage of more than 12,000 kilometers for passenger transportation and about 16,000 kilometers for other uses will be built by 2020, according to an ambitious railway construction blueprint of the Chinese government this year.

To accomplish this project, China will need two trillion yuan (250 billion U.S. dollars) for railway construction.

The ministry suggested Chinese railway companies adopt every possible method for financing, including bond issuance, public offering, foreign direct investment or investment by social funds.

Statistics show Daqin Railway Co., Ltd. raised 15 billion yuan (1.9 billion U.S. dollars) by issuing 3.03 billion shares at a price of 4.95 yuan (0.62 U.S. dollars) per share on the Shanghai Stock Market. Guangshen raised about 9 billion yuan during this IPO.

The money raised from Guangshen's IPO will be used for acquiring the railway from Guangzhou to Pingshi. After the acquisition, the operating mileage of Guangshen Railway will rise to 481.2 kilometers from the current 152 kilometers.

Guangshen Railway reaped a net profit of 361.8 million yuan in the first half of this year, a year-on-year rise of 11.5 percent.

Some analysts, however, pointed out that public offering may not be ideal for financing due to its high cost and long period for fund returning.

Bond issue, regarded by many as a more convenient means of raising railway construction funds, has helped the Ministry of Railways raise about 29 billion yuan since 1995.

Meanwhile insurance fund has expressed strong interest in railway construction. About 80 billion yuan (10 billion U.S.dollars) of China's insurance fund will flow into the railway upgrading project between Beijing and Shanghai, one of the country's busiest railways.

Insurance companies' investment will account for half of the total fund needed for the Beijing-Shanghai railway reconstruction project, said Wu Dingfu, chairman of the China Insurance Regulatory Commission.

Source: Xinhua