Mainland rail builders expect bumper rest of the year

Ministry will boost spending as part of Beijing's stimulus programme to spur the economy

PUBLISHED : Wednesday, 05 September, 2012, 1:32am
UPDATED : Wednesday, 05 September, 2012, 2:24am

China Railway Group and China Railway Construction Corporation (CRCC), the two state-owned firms that build most of the mainland’s railways, anticipate increased  spending for the rest of this year as Beijing is expected to stimulate the slowing economy.

The Ministry of Railways would spend at least 67 billion yuan (HK$82 billion) a month for the rest of this year, China Railway president Bai Zhongren told a media briefing yesterday.

That is a big increase from 27 billion yuan a month from September to December last year, when rail spending slowed due to a safety inspection following a high-speed train accident.

Bai said more than 80 per cent of delayed projects had resumed.

Beijing had raised its rail construction spending target for this year  to 496 billion yuan from 470 billion yuan, he said.

Earlier, the railways ministry had set its target at 406 billion yuan for 2012.

“In the second half, a more active fiscal policy is expected as China is dedicated to reversing the economic downturn, and infrastructure investment will drive economic growth,” a China Railway press release said.

“CRCC expects revenue and orders to rise in the second half as rail spending will start accelerating from September,” a JPMorgan report said.

The accelerated expenditure is partly due to defective high-speed rail projects.

Part of the Harbin-Dalian high-speed railway in the northeast was expected to be rebuilt due to roadbed erosion,  the People’s Daily Online reported.

Wang Mengshu, an academic from the Chinese Academy of Engineering, told the Global Times that parts of the railway were not designed properly.

The line is 904 kilometres long, cost 92.3 billion yuan and was completed in December 2010, according to People’s Daily Online.

China Railway’s new orders rose 21.7 per cent to 290.41 billion yuan in the first half.

“In the first half, our rail orders were not big, less than our orders from property, roads and urban projects,” Bai said.

Bidding activity by the railways ministry was weak in the first half, with less than 10 billion yuan of rail tenders, due to the ministry’s focus on resuming projects halted due to a lack of funding, JPMorgan said.

Given that the National Development and Reform Commission recently approved nine new rail projects, CRCC expected the  ministry to launch tenders for these from this month, JPMorgan added.

China Railway’s revenue from infrastructure building fell 15.2 per cent to 161.85 billion yuan in the first half, mainly due to the rail downturn,  deputy finance director Wang Kai said.