Rail ministry gets 30b yuan lifeline
Beijing has come to the rescue of the loss-making Ministry of Railways, committing to a 30 billion yuan (HK$36.76 billion) spending programme to support rail projects and pledging the additional support of various government departments.
News of the pledges of support was reported on Wednesday by the China Securities Journal, which said: "In the face of rail construction pressure in the fourth quarter, the State Council recently called on various government bodies to support the Ministry of Railways in funding rail construction projects, and the central government will also support rail construction."
Guotai Junan analyst Gary Wong noted that the support came at a time when the ministry was so heavily in debt it was experiencing difficulty in obtaining loans from banks.
The ministry made its fifth bond issue of the year this week, raising 20 billion yuan and breaching its bond issue limit, which is set at 40 per cent of its net asset value.
Last week, the ministry held a meeting in Beijing to launch new projects, accelerate continuing projects and complete investments in major projects. The spending programme, it said, was to meet the State Council's policy to accelerate rail construction.
Since rail construction spending fell 28 per cent to 227.77 billion yuan in the first eight months this year, spending must amount to nearly 290 billion yuan over the last four months of the year to meet the government's full-year target of 496 billion yuan.
"The ministry is not keen to accelerate rail projects because it is short of money. But it is under pressure from the central government to do things more quickly to boost GDP," said Jefferies analyst Julian Bu. "But there is a high chance it will accelerate rail projects."
The ministry suffered a loss of 8.8 billion yuan in the first half.