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Last Updated: Tuesday, 1 November 2005, 07:41 GMT
China eyes state railway sell off
Chinese train
The promise of China's untapped potential is likely to lure investors
China plans to open up its rail network to investors, and will aim to list parts of the nation's infrastructure on foreign and domestic stock markets.

The Railway Ministry said that it wants to raise cash to finance a development and reconstruction programme.

China is looking to spend 2,000bn yuan ($250bn) on its railways by 2020.

Though still in its early stages, the plan would see the rail network split up into corporations, the best of which would be earmarked for listing.

Big plans

China's has great ambitions for its rail network as it looks to open up the countryside and spread the effects of its booming economy.

Key to the expansion will be boosting the amount of track from the current level of 73,000 kilometres (45,260 miles) to 100,000 kilometres.

There is a great divide between urban and rural development, and improved transport links will help to narrow the gap.

It will also enable companies to shift goods around China more quickly and efficiently, helping to underpin and extend the current growth explosion.

China's total economic output has exceeded 9% in each of the last nine quarters.

Workers on the China-Tibet rail line
The pace of development in China's rail system is set to pick up

Huang Min, chief economist at the Railways Ministry, unveiled the plans in comments that were first reported by the Financial Times.

Mr Huang said that Beijing will offer foreign investors the chance to take minority stakes in national lines and majority or full ownership of local railways.

"I hope overseas companies will think this is an opportunity and will invest and take a direct role in operations," Mr Huang told the newspaper.

'Universal service'

He continued that Beijing was reviewing which stock markets should be used to list state railway units. In the past it looked to Hong Kong and US markets when listing state-run firms, the paper said.

"We will encourage the entities with the best market efficiency to list, including on overseas markets. This will happen next year or the year after," Mr Huang predicted.

While investing in China's railway network is likely to be attractive to many firms, it also carries a number of risks.

There would need to be an overhaul of the rail industry's regulatory system, with particular focus on its pricing structure, the FT said, adding that there was a lack of transparency that also may deter many foreign investors.

The concern is that the Chinese state would not allow companies to raise prices if it meant angering consumers or stoking up inflation.

Mr Huang told the FT that the government would balance the "universal service" obligations of the rail network with investors' needs.

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