China to offer 300 billion yuan of railway contracts until end of the year

Mainland is expected to release 300 billion yuan in construction contracts for the rest of the year

PUBLISHED : Wednesday, 03 September, 2014, 1:33am
UPDATED : Wednesday, 03 September, 2014, 1:33am

The mainland is expected to release 300 billion yuan (HK$377 billion) worth of railway construction contracts in the remaining months of this year as the government steps up support for railway investments, said China Railway Group, the country's largest railway builder.

"China does not have a railway network that is too large. It still needs to build more railways. That is good for people's livelihood and economic development," said Yang Liang, chief financial officer of China Railway Group.

Yu Tengqun, secretary of the board of directors of the state-owned railway firm, said in a post-interim results press briefing yesterday the company was expected to obtain a major portion of the new railway contracts.

China Railway Group's market share in railway construction contracts ranged from around 46 per cent to 50 per cent from last year to the first half of this year. The company expects to maintain the same level of market share in new contracts.

The company's new contracts for railway construction amounted to 91.77 billion yuan in the first half, a year-on-year decline of 12.9 per cent. But Yu said as China's railway investments accelerated after April, there was also an increase in the company's railway contracts. During the first eight months of this year, the company's new contracts for railway construction amounted to more than 100 billion yuan, rising over 10 per cent compared to the same period last year, said Yu.

The increase of railway investment is viewed as part of the mainland's micro stimulus policies aimed at boosting the economy. "Fixed asset investments still accounts for over 50 per cent of GDP. As growth in property investment slowed down, the government relies more on infrastructure investments," said Liao Qun, China chief economist at Citic Bank International.

China Railway Corp, the national rail operator which was previously part of the now-defunct Ministry of Railways, and also a major client of Hong Kong-listed China Railway Group, lifted the annual railway investment twice this year from 630 billion yuan to 800 billion yuan, close to a record high, while the number of new railway projects increased to 64 this year.

As the mainland increases railway investment at home, Premier Li Keqiang has been actively promoting high-speed rail projects overseas. China Railway Group said it also expected to obtain some of these contracts.

The company aimed to increase the proportion of its overseas contracts to 20 per cent of total contracts, and to raise overseas income contribution from the current level of 5 per cent to 10 per cent in the coming years, said Yu. The company now has projects in Africa, South America and Southeast Asia.