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 in 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 to foreign investors. Three of the projects will be solely foreign funded, two others will involve the transfer of property rights, while the sixth, the Pingshang-Lanshan Line, will be a joint venture between local government and a foreign partner yet to be determined.

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

The lines run past natural resources, large coalmines 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 recoup their investments and start making profits.

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 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 program to build more than 2,600 kilometers of track by 2010. Total investment is estimated to reach 70 billion yuan (US$8.46 billion).

"International cooperation 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 percent of the total.

(China Daily June 13, 2005)