Jiangxi earmarks 100b yuan for expressways
Brushing aside concerns over the rising debts of local governments on the mainland, Jiangxi province is planning to spend more than 100 billion yuan (HK$123 billion) on building expressways by 2015.
Accelerating the speed of construction of its road network, the government of the southern province plans to build 2,000 kilometres of expressway by 2015, instead of the previous target of 2020, according to a bond prospectus of the Jiangxi Provincial Expressway Investment Group, an investment company wholly owned by the provincial government. Going by the plan, Jiangxi will have more than 5,000 kilometres of expressway by 2015.
'To achieve its targets, it is initially estimated that over 100 billion yuan will be invested in new expressway projects in Jiangxi in the next five years. Hence the company faces great funding pressure in the next three to five years,' the prospectus says.
The firm plans to issue 3 billion yuan worth of one-year bonds, of which 80 per cent will be used to repay bank loans.
According to a report by Capital Economics, many of the 8,000-plus local-government investment vehicles that fund infrastructure projects will fail if they cannot access credit.
Jiangxi Provincial Expressway will be involved in construction work amounting to 77.68 billion yuan, from last year to 2015. Of this, 9.96 billion yuan will be invested by the company and 13.35 billion by the Ministry of Transport. The remaining 54.37 billion yuan will be bank loans.
The company's short-term debt jumped from 1.57 billion yuan at the end of 2010 to 5.02 billion yuan on September 30. Long-term debt grew from 10.2 billion yuan to 13.39 billion yuan over this period. Its gearing ratio rose from 34.26 per cent in 2009 to 53.51 per cent on September 30.
'Local officials have a great interest in infrastructure projects. I cannot prove there is corruption, but local officials benefit a lot,' said Zheng Tianxiang, a professor at Sun Yat-sen University in Guangzhou who specialises in transport.
Debts from infrastructure projects continued to grow in China because loans could be refinanced, Zheng added. Guangdong province had invested a cumulative total of 300 billion yuan in highways, of which it still owed 200 billion yuan, he pointed out. 'The principal has not been repaid.'