The Ministry of Railways has cut the mainland's rail construction budget for the whole of this year by 100 billion yuan (HK$119.55 billion).
In the first quarter alone, the total value of railway contracts plunged 90 per cent, mainly because of the central government's investigation into project tenders linked to former railways minister Liu Zhijun.
The ministry had reduced spending on rail construction for this year from 700 billion yuan to 600 billion yuan, said Li Jiansheng, chief financial officer of the China Railway Group.
'Our contracts this year will be less than last year. This has something to do with Liu,' said Li, who is also chief legal officer of the Hong Kong and Shanghai-listed company.
The China Railway Group and China Railway Construction Corporation (CRCC) are the two dominant state-owned rail construction firms, accounting for more than 80 per cent of the railways built on the mainland.
Liu was dismissed in February and is under investigation for violation of 'discipline', a code for corruption in the official circles. On March 25, Premier Wen Jiabao told a State Council anti-graft meeting that construction tenders, including railway tenders, would be investigated.
'China Railway's dwindling new orders mirror China's drastic cuts in new railway orders as a result of the recent changes at the Ministry of Railway's leadership and the ongoing investigation into corruption,' JP Morgan analyst Karen Li wrote in a report.
