Guangzhou's first underground railway will open partially for service at the end of this month, quashing long-standing rumours over the past four years that its construction has been delayed or scaled down. Guangzhou Metro Corp general manager Chen Qingquan said the first phase of Line One - a 5.3-kilometre section with five stations - would open on June 28. The city initially planned the opening for July 1, the day of Hong Kong's return to China. 'However, we do not want to compete with Hong Kong, so we chose June 28,' said Mr Chen. He said the service's trains, made in Germany, were yellow because 'it is warm and bright - like sunshine underground'. Mr Chen said construction work, beginning in December 1993, had been on schedule, despite temporary problems such as shortages of funding and complicated geological structures underground. Construction of the second phase of Line One, 13.18 kilometres long with 11 stations, is running on a tight schedule with the aim of opening for service by the end of next year. Guangzhou Metro Line One, 18.48 kilometres long with 16 stations running from Guangzhou Steel Plant in the southwest and through the city centre to Guangzhou East Railway Station, will cost 12.71 billion yuan (about HK$11.8 billion). The project, China's third underground mass transit system after Beijing and Shanghai, has overcome its toughest challenge after the central government imposed a three-year economic austerity programme, starting in July 1993. A nationwide property market slump clouded the future of the metro line because selling land-use rights along the railway was a key source of finance. The difficult situation sparked rumours of funding shortages, failures by developers to pay sub-contractors and workers and a halt to construction work. 'Construction work of Line One was never delayed by the uncertainties,' Mr Chen said. Mr Chen, also deputy secretary-general of Guangzhou municipal government, said the government planned to raise between 700 million and one billion yuan a year by selling land during the construction period. He admitted some of the capital had not arrived on schedule, but the government had resolved the problem eventually by other means, including a 5 per cent construction fee on every hotel room in the city and an issue of bonds to employees. Mr Chen said funding for Line One was settled after the State Planning Commission allowed Guangzhou Metro Corp to issue corporate bonds worth 520 million yuan this year to help finance construction. Construction cost overruns would be controlled within 10 per cent of the total investment. 'We are very careful in controlling spending, thanks to low inflation in the past two years,' he said. Answering claims by foreign companies that the construction cost of the Guangzhou Metro was expensive, Mr Chen attributed the cost to the area's complex geology, the redevelopment of the old city centre and high reallocation costs. 'The underground geological structure in Guangzhou is very complicated and we have no track record for reference,' he said. 'Shanghai's ground layer, formed by silt carried by the Yangtze river, is simpler than ours. 'Guangzhou city centre was swamps and beaches 200 years ago. So the ground comprises of rock, mud, sand and silt. We collected the underground information for exploration every five metres before construction started.' Like metro lines in most cities, Guangzhou's runs through the densely populated city centre. The government has made use of the construction work to redevelop the old city centre into a modern commercial district. For instance, the government has widened Zhongshan Road from 16 metres to 35 metres by relocating a large number of residents from the area. The resettlement work was expensive because new houses, offices and factories had to be built to house the residents, government offices and military staff. More than 20,000 families, offices and institutions - 100,000 people - have been moved as part of the rail scheme. Despite the difficulties, Mr Chen said the line was important to the development of Guangzhou. 'Traffic congestion in the city centre is getting worse and a mass-transit system is the only means to solve the problem,' he said. 'We don't expect the traffic problem to be solved with only five stations in the first phase, before a full network is built with the completion of the second phase.' The feasibility study shows that Line One can carry 1.13 million passengers a day. The line is due to reach saturation point in 2023. Mr Chen said Guangzhou Metro Corp would not issue shares on the stock market to raise funds, despite the huge demand for capital for the 29km Line Two. Line Two is now in the planning stage. The municipal government has identified it as the top priority infrastructure project for the Ninth Five-Year Plan, ending in 2000. 'The government is seeking State Planning Commission approval and it will start the preparation work by 2000 and begin construction after that,' he said. The project will be carried out in several stages in accordance with traffic demand. Mr Chen said Guangzhou Metro Corp was operating in a similar mode to Hong Kong's Mass Transit Railway and Singapore Mass Rapid Transit. 'Metro line should be a kind of social welfare provided by the government because of its capital-intensive nature. 'The fares will not be affordable if our aim is to make good profit,' he said. 'We also have to pay interest for old borrowings. So all revenues generated from Line One will be used to pay interest and reserved for future development but not shareholders.'