Mainland cities will expand their metro railways almost tenfold by 2050 to keep up with the aggressive urbanisation drive of the new leadership.
By 2050, mainland cities will have 11,700 kilometres of metro railway, accounting for at least half the world's metro railway, said a bond prospectus of China CNR Corporation, a leading rolling stock manufacturer. This is nearly 10 times the 1,688 kilometres of operating metro railway in 14 cities at the end of 2011.
By 2015, there would be 3,000 kilometres of metro railway, and by 2020 there would be 6,200 kilometres, said the Shanghai-listed firm's prospectus. In the next few years, 1.6 trillion yuan (HK$2 trillion) would be invested in metro rail construction, CNR said.
"Our nation's urban railway has entered a new stage of development. China has already become the world's biggest metro railway market," it said.
Incoming premier Li Keqiang had put a lot of emphasis on urbanisation, said JP Morgan analyst Karen Li. "Absolutely, subway building is linked to urbanisation," she said.
In November, Li Keqiang wrote in an article in People's Daily that urbanisation was "a huge engine" of the mainland's future economic growth.
Once the nation's new leadership takes over next month, more subway projects would be approved, said Karen Li. "More subway projects will begin construction this year." Companies working on mainland metro rail projects "all said there would be heavy subway investment".
Tier-one cities such as Beijing are congested and polluted and so need more metro railways to alleviate these problems, Karen Li explained.
Of the new metro railways to be built between now and 2015, 16 per cent will be in the Pearl River Delta, 25 per cent in the Yangtze River Delta and 24 per cent in the Bohai region, including Beijing, said the credit rating report on CNR's bond issue by China Chengxin International Rating.
The state-owned firm invested 11 billion yuan last year, and will invest 10 billion yuan this year and 10 billion yuan next year. The investment will go into metro rail equipment, electro-mechanical systems, technology, logistics, financial services, as well as non-rail industries such as new energy and green cars.
CNR and CSR Corporation, a Shanghai and Hong Kong-listed firm, produce nearly all the mainland's rolling stock.
CNR plans to issue 4 billion yuan of one-year bonds, which will be used to repay bank loans. Its short-term debt nearly tripled from 12.2 billion yuan at the end of 2010 to 33.89 billion yuan on September 30 last year, while its accounts receivable tripled from 10.27 billion yuan to 30.54 billion yuan over this period. In the first nine months of last year, CNR suffered a net operating cash outflow of 5.48 billion yuan. The company's gearing ratio stood at 69.25 per cent at September 30 last year.
"The company's short-term debt has grown rapidly, its liquidity pressure has increased," said Chengxin.
In the first nine months of last year, CNR's revenue increased 0.2 per cent to 64.3 billion yuan, while net profit grew 9.1 per cent to 2.34 billion yuan.