200b yuan falls far short for ministry
There is 200 billion yuan (HK$244 billion) in new funding in the pipeline for the indebted Ministry of Railways, but industry experts say the agency is still a long way from overcoming its financial shortfall that has resulted in major delays in rail projects.
Experts warn that idling factories and unpaid workers involved in railway projects could engender social instability if the funding problem lingers, but they also believe that Beijing will eventually sort out the ministry's financial woes.
The ministry will get the 200 billion yuan as emergency aid from Beijing via China Development Bank and the Ministry of Finance in the form of loans and bonds, according to a Xinhua report last week.
However, professor Wang Mengshu, deputy chief engineer of the China Railway Tunnel Group and a key drafter of the mainland's high-speed-rail development plan, told the South China Morning Post yesterday that construction of more than 10,000 kilometres of railways, mostly high-speed lines, had been postponed because of funding problems.
He said it would take much more than 200 billion yuan for rail authorities to fully pay off contractors' debts and continue construction of key rail projects.
'To carry out the national railway-development plan, the ministry needs an average of 800 billion yuan every year for the next five years to keep things moving on schedule,' Wang said.
'If factories and workers remain unpaid, they will become the seeds of social instability and even a political issue.'
In 2008, Beijing said it intended to build 30,000 kilometres of new rail lines by the end of 2012, with nearly half of them being high-speed linkswith speeds of more than 250km/h.
The government relied on the construction of high-speed railways to stimulate the economy amid the global financial crisis, giving the sector more than 1.2 trillion yuan, or 30 per cent of the total stimulus package. Professor Zhao Jian, an economist at Beijing Jiaotong University and an open critic of 'the Great Leap Forward' (that has been the mainland's high-speed rail construction), said yesterday that the rail ministry's financial difficulties stemmed from the dramatic change in the mainland's macroeconomic environment.
'The problem is not that the ministry has received too little money, but too much,' Zhao said.
He explained that the explosive investments during the financial crisis made the ministry overly optimistic about its future revenues, and it launched many large construction projects across the mainland.
But the money needed for long-term infrastructure projects, such as high-speed railways, must continue flowing in for years to ensure the completion of the projects.
'Now the central government has spent all the stimulus money, and they have no more funds to support these expensive and barely profitable high-speed lines under construction,' Zhao said.
'I'm sure a solution will eventually come, and construction will continue, but the decision-making process will cause painful debates among policymakers, bankers and taxpayers.'
The rail ministry financed most of its previous investments from state-owned commercial banks.
A rail ministry official told The Economic Observer last week that after the deadly high-speed train crash in Wenzhou in July, they had failed to borrow a cent from the formerly generous banks.