In a working conference held earlier this year in Beijing, Qiao Jinzhou, president of China Railcom, said the company's total investment had dropped from 9.87 billion yuan (US$1.18 billion) last year to an estimated 5.7 billion yuan (US$686 million) this year, a drop of 32 per cent.

Analysts believe the shrinkage has been caused by an insufficient cash flow.

To overcome the problem, China Railcom signed an agreement with the China Development Bank (CDB) last June.

According to the agreement, CDB originally planned to loan China Railcom 10 billion yuan (US$1.2 billion), but due to doubts concerning the company's ability to repay the loan, China Railcom only received about 7 billion yuan (US$840 million) in the end, Zhou Huilin, technology officer of China Railcom, was quoted as saying by the Financial Times.

China Railcom's long standing plan to go public overseas could be a way around the problem, however the plan was suspended when former general manager Peng Peng was sacked by the company's shareholders last September.

The bearish performance of the NASDAQ has also been partly to blame, said analysts, adding that the low profitability of the company's current business was another major factor depressing investor enthusiasm.

"We have no detailed plan to go public to raise money," said a China Railcom's spokesman in a recent interview with China Daily. "We are not ready."

With total assets of 13.6 billion yuan (US$1.63 billion) and registered capital of 1.03 billion yuan (US$124 million), China Railcom is controlled by the Ministry of Railways, which hold a dominant 51 per cent stake in the company, with 15 shareholders taking the other 49 per cent.

The company reaped sales revenues of 5.73 billion yuan (US$690 million) last year, up 35.5 per cent from the previous year.

However, the figure accounted for about 1.4 per cent of the country's total, compared with China Mobile's 37.4 per cent and China Telecom's 32.5 per cent.

The newly recruited fixed line phone subscribers last year stood at 2.09 million, with the total number of subscribers standing at more than 3.4 million.

"We are going to increase our sales by 30 per cent and double our fixed line subscribers this year," said Qiao.

China Railcom needs further reform to be able to successfully conduct private fund-raising, analysts said.

According to the president, in-depth reforms are going to be carried out within the company, including company restructuring and diversification of business operations.

China Railcom was awarded the right to operate international telecommunications business in February.

Sources said it is undergoing official procedures and international telecommunications operations are likely to be kicked off within the first quarter of the year.

(China Daily March 13, 2003)