Railway funds drying up as debt increases

China's railway authority is falling into huge debt resulting in major projects not being able to be completed this year, a renowned high-speed railway development expert said on Wednesday. The debt also hinders Chinese communications overall if more money is not invested.

The Ministry of Railways owes more than 160 billion yuan ($25 billion) to its two major project contractors, China Railway Group and China Railway Construction Group, said Wang Mengshu, of the Chinese Academy of Engineering.

"Key construction projects in the Northwest, like the Lanzhou-Chongqing railway, can't afford the wages for workers for the next three to four months," Wang told the Global Times on Wednesday. "Petitions by workers employed by China Railway Group Ltd. Now sit at 2,000."

The bill for this year's railway infrastructure construction stands at 600 billion yuan. But, only 316.4 billion yuan-valued tasks had been completed by August, the Beijing-based Economic Information Daily reported on Wednesday.

"It's dangerous for railway construction in China. These two enterprises are listed among the top 500 global corporations and contribute greatly to the development of Chinese railway construction," added Wang.

The Ministry of Railways was not available for comment on Wednesday.

Railway minister Sheng Guangzu confirmed in March the ministry had a debt of 1.8 trillion yuan, but the asset-liability ratio of 56 percent was quite normal and controllable.

However, the Economic Information Daily said the ratio now has grown to 58 percent, and major banks have raised lending rates to them, following the bullet train crash in July that killed 40.

High debt load and difficulty in capital raising have become the bottleneck of railway development in the country, causing some construction projects to be delayed or slowed down, the report said.

On Tuesday, the central government issued a guideline on its website (www.gov.cn), lowering the threshold for private investment or joint ventures to join railway construction.

"I don't think it will help Chinese railway construction come through," Wang responded to the document. "The country should be the major investor."

Wang explained that huge loans for construction of railways is a common practice in almost all countries and urged the central government to allow more investment in the industry.

Wang said the country has purchased too many foreign bonds instead of lending money to the Ministry of Railways.

"Railways in China need to develop desperately, there is a great demand for freight and passenger trains," Wang said. "The country's development will stagnate if loans for railways stop."