HUNDREDS of billions of yuan in annual losses due to insufficient freight capacity have prompted China to experiment with opening its railway system to foreign investment. Railway Minister Han Zhubin said China could announce later this year the provisional rules governing foreign investment in developing and running railways, according to the semi-official Hong Kong China News Agency. Those regulations would permit the ministry to issue bonds overseas, list some railway companies abroad and establish railway investment funds. The report said, quoting sources, that the ministry hoped to issue US$3 billion in overseas railway bonds by 2000. Foreign companies would also be allowed to establish joint ventures which could be used to develop property along the rail lines and set ticket prices. The ministry has selected 11 work units to form experimental shareholding companies responsible for profits and losses during this year and next year. It will also liberalise the price structure for freight transportation in an effort to make it a part of China's market economy. The ministry admits that nation's railroad system needs a massive expansion programme to catch up with the China's fast-paced economic growth. China's current railway system is capable of handling just 60 per cent of the annual demand for rail freight transport, resulting in losses of 500 billion yuan (about HK$450 billion) in 1993, says a mainland railways expert. In addition, China's railway system lost seven billion yuan last year because the fees charged for railway freight did not cover the transportation costs. Statistics show that China's gross domestic product is 50 times greater now than it was 40 years ago and incomes are 30 times higher. But China's railways have only lengthened from 21,000 kilometres to 54,000 km - an increase of about 150 per cent. Difficulties in buying tickets, boarding trains and shipping freight have become a serious social problem and a critical obstacle to further economic development, the news agency reported. By the turn of the century, the ministry plans to boost the rail lines to 70,000 km, of which 25,000 km will be used to create double-tracking. Emphasis would be placed on building three railways linking Shanxi, Shaanxi and other coal production centres with east coast ports.