Beijing has vowed to speed up reforms to broaden the funding of railway construction in the country but analysts doubt if the low returns in railway projects and lack of protection for investors' interests would draw private capital. A reform in railway financing and investment is considered critical by the government as it seeks to open up a long-term financing channel for railways. Premier Li Keqiang said in a State Council meeting on Wednesday the country would form a rail development fund for financing railways. In addition, ownership and operating rights of some of the inter-city and suburban railways would be opened up for private investors. "What the premier said can be seen as a 'signal' showing the government's determination for reforms. However, it actually did not touch the heart of this issue," said Li Pan, an analyst at Bank of China. He said a major problem was that the returns on many railway projects were even lower than the meagre deposit rates banks offered, hardly an incentive for private investors. Li Xiaolu, an analyst with CSC International, said the government was likely to launch financial products with fixed rates through the railway development fund. "This will help diversify the portfolio of investors compared with traditional railway construction bonds," she said, adding most bond buyers were large institutions and state-owned firms. However, she said the government had not detailed how private capital could participate in railway projects and how small investors' interests would be protected if they chose to do so. "These will be the top concerns for those who come not only for fixed returns but also hope to profit from operating the railway lines," Li Xiaolu added. At 98,000 kilometres, China has the second-biggest railway network in the world. But the size is still half that of the United States. Beijing plans to increase it to 120,000km by 2015, which will require an investment of 2.8 trillion yuan (HK$3.5 trillion). Li Keqiang said future rail construction would focus on the central and the western areas of the country. Earlier this year, China Railway Corp was formed to split the commercial and administrative operations of the national railway network. The company issued 20 billion yuan of railway construction bonds with an interest rate of 4.97 per cent and a maturity of 10 years. They are part of a bond quota of 150 billion yuan approved by the National Development and Reform Commission this month. Shares in China Railway Group rose 1.8 per cent to HK$4.26 yesterday, while China Railway Construction jumped 2.5 per cent to HK$8.23. The benchmark Hang Seng Index fell 0.3 per cent.