China cuts planned railway spending for 2011-2015 -paper

BEIJING, Oct 9 (Reuters) - China has cut planned railwayinvestment by 500 billion yuan ($79.5 billion) to 2.3 trillionyuan under a five-year plan to 2015, the official EconomicInformation Daily reported on Tuesday, but that may reflectspending cuts that have already occurred.

In 2011, the first year of the five-year plan, railinvestments slowed sharply after a fatal crash and the firing ofthe minister and some of the ministry's senior staff. But thegovernment has been trying to boost investment since then,approving rail projects and giving a green light for theministry to raise money through corporate bonds.

The Ministry of Railways said in July it would hike spendingby 64 billion yuan ($10 billion) to 580 billion yuan in 2012 - a12.4 percent increase from an initial 516 billion yuan.

The revised five-year spending plan would mark a nearly 18percent drop in the initially planned railway investment of 2.8trillion yuan, according to the newspaper, which is run by theXinhua news agency.

China will speed up reforms on railway investment andfinancing system, expanding the proportion of direct financingwhile encouraging railway operators to sell shares, the papersaid, citing unnamed government sources.

China poured a total of 1.98 trillion yuan into railwayprojects during the period of 2006-2010.

The government has recently approved 25 rail projects thatcould be worth more than 700 billion yuan, as part of measuresto stimulate the country's slowing economy.

The Ministry of Railways has won regulatory approval toissue 150 billion yuan in corporate bonds this year as theNational Development and Reform commission, China's top economicplanner, exempted the ministry from the usual requirement thatdebt must not exceed 40 percent of net assets.

China said earlier this year it would open up the railwayindustry to private investment on an unprecedented scale, butprivate investors are sceptical as the Ministry of Railwaysserves as both an operator and regulator.

The rail ministry suffered an after-tax loss of 8.8 billionyuan in the first half of 2012 as it struggles to cope withrising operating costs and mounting debts, local mediareported.($1 = 6.2872 Chinese yuan)

(Reporting By Xiaoyi Shao and Kevin Yao; Editing by Ken Wills)


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