Debt of China Railway Corp reaches RMB3tn ($504bn) and counting

December 25, 2013 Leave a comment

Debt of China Railway Corp reaches RMB3tn and counting

Staff Reporter

2013-12-24

The total debt of national railway operator China Railway Corporation (CR), has topped the staggering 3 trillion yuan (US$504 billion) mark and counting as it continues to execute major railway projects, reports the Chinese-language Economic Information Daily.The company’s debt hit 3.06 billion yuan (US$504billion) as of Sept. 30, compared with its total assets of 4.8 trillion yuan (US$797.3 billion), with net loss reaching 1.7 billion yuan (US$280 million) in the first nine months.

Despite the huge debt, CR has not let up its aggressive expansion pace as the planned fixed railway investment still reaches 660 billion yuan (US$108.7 billion) this year, including 530 billion yuan (US$87.3 billion) for infrastructural projects. While CR has no problem completing railway infrastructural projects this year, each investment will entail an addition to its enormous debt, said an industry insider. The operator now has ongoing projects totaling 1.5 trillion yuan (US$255.3 billion) in scale.

In the first three quarters of this year, CR boosted its total assets by 359.2 billion yuan (US$59.2 billion), adding 271.6 billion yuan (US$44.7 billion) to its debt. The total debt of the company is closely associated with the pace of the nation’s railway construction, which relies on loans or bond issuance, said the insider.

At present, the debt/assets ratio of CR has climbed to 62.6%, compared with 26.6% at the end of 2004 and 42.4% in 2007. “Banks now have become reluctant in extending loans further to CR,” said Wang Mengshu, a member of the Chinese Academy of Engineering.

Insiders claim that the rail operator should resort to multiple channels in coping with its financial problems, such as ticket fare hikes, increasing its railway management capability, government subsidies, sales of land, and tax incentives.

According to the railway development plan during the 12th five-year national development plan period (2011-2015), as of 2015 the total length of China’s railway in operation will reach 120,000 kilometers, including 50,000 kilometers in central and western China. In addition, 60% of the railway will feature electrified operation by 2015 and the nation’s railway system will boast load factor of 4 billion passengers, as well as freight factor of 5.5 billion tonnes.

By comparison, the nation’s railway in operation is expected to reach 102,300 kilometers in length as of the end of 2013, a difference of 17,700 kilometers compared with the 2015 target. To reach the goal set in the 12th five-year plan, some 8,850 kilometers of railway will have to be constructed in 2014 and in 2015, double the amount in 2012 and 2013, with a capital need of 1 trillion yuan (164.7 billion) a year, for which only 800 billion yuan (US$131.8 billion) is available, the paper said.

Filed under Macro Trends

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