Updated: 2005-06-13
Railway projects in Shandong Province could be funded solely by foreign capital under new rules that have lifted restrictions on who can invest.

The province is the first in China to allow foreign investment to enter railway construction and to allow local rail property rights to be transferred to foreign companies.

The official website of the Shandong State Assets Regulatory and Management Committee announced the news at the weekend. The committee has put forward six local rail lines for foreign investors. Three of the projects can be solely funded by foreign money, and two others are preparing to shift property rights.

The six projects include the Linqu-Yishui Line, which needs US$148 million, the Dalailong Line, which needs US$151 million, and the Longkou-Yantai Line, which should have a total input of US$145 million.

The lines run past natural resources, large coal mines and petroleum companies.

The transport capacity of the Pingshang-Lanshan Line is expected to reach 10 million tons next year and 40 million in five years' time. In six years, investors are expected to earn their money back and start making a profit.

Shandong needs to increase railway construction in the province to meet the needs of a fast-growing economy, said Li Chang'en, vice-director of the Shandong Railway Bureau.

As the country's second-largest economy at provincial level, Shandong demands of all kinds of resources, and a shortage of transport has become a major headache.

Li said Shandong signed a deal with the Ministry of Railways in April to conduct a joint massive railway building programme, aiming to build more than 2,600 kilometres of track by 2010. Total investment is estimated to reach 70 billion yuan (US$8.46 billion).

"International co-operation will improve the level of construction, equipment and management of the sector," said Li. "There are no policy obstacles for foreign investors to enter the sector. Local railways are different from national railways in that they enjoy a lot of freedom."

The website also said that two companies from Australia and the United States have shown a lot of interest in the Linqu-Yishui Line. More details should be available by the middle of June.

Railway construction in China still relies heavily on State investment. Only a very small amount of non-State capital has been injected into the sector in recent years less than 1 per cent of the total.