Premier encourages SOEs to open funding to market participants

Premier Li Keqiang asked State-owned enterprises, especially those in monopolistic industries, to open up their businesses to the market as he visited the country's sole rail corporation on Friday.

The premier praised the rail system's reform as "smooth and stable" following its dismantlement in March 2013－the most important part of administrative restructuring under the current leadership－to separate the now-defunct ministry of railways' government from its enterprise functions.

"You've done a lot to crack open a hard nut in the past year. You've obtained significant achievements and what you have done will serve as a model for the reform of other State-owned enterprises," Li said.

Li is the first top leader paying a trip to the China Railway Corp, headquartered in western Beijing.

Experts said his visit signaled approval from the central government on the reform of the rail system, which has more than 2 million employees across the country and used to have a separate police and judicial system.

At the office of the general planning department, where the country's high-speed railway was planned, Li looked up at a progress chart hanging on the wall illustrating the construction of the 64 new rails.

Deadlines for environmental assessments, land acquisition and approval of commencement reports are carefully marked. Some are labeled with a small red flag to signal completion.

All of the new rail projects, which involve investment of 800 billion yuan ($128 billion), will start construction within this year as scheduled, Sheng Guangzu, general manager of the rail corporation, told the premier.

"Most of the new rail projects have started construction, and a few others are wrapping up the approval procedure," Sheng said, beating speculations of funding difficulties.

"Some of the 800 billion yuan will be invested this year, but the majority will be left for 2015," he said.

The central government increased railway spending from the original 630 billion yuan to 800 billion yuan in April, part of its measures to cushion the downward pressure of the economy.

The premier said the reform of funding methods in rail construction is the most vital part in the entire reform of the rail system.

"The government can no longer work alone in funding rail construction. We have to open it up to the market. The problem is how to attract private funds with profitable projects while continuing the less-profitable construction of railways in central and western areas," Li said.

"In addition, the reform of rail construction funding will cast a light on similar reform of other natural monopoly industries," he added.

Yang Zhongmin, head of the department, said a few of the 64 projects are jointly financed by the corporation and private capital.

A rail linking Changchun of Jilin province with West Bayanhuar, a coal-rich township in the Inner Mongolia autonomous region, is expected to start construction this month. The construction of the freight line requires 16.4 billion yuan and will be completed within three years, according to its environmental assessment report.

Yang said about 90 percent of the investment is from private investors.

China reformed the funding of railway construction and called for accelerating rail construction in central and western regions in July last year. Since then, multiple fundraising for railway construction has been pledged, including a greater role for private capital and the establishment of a railway development fund, which is expected to bring billions of yuan in funding from private investors.

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