Measures are being drawn up to attract investors to China's 2 trillion yuan (US$250 billion) railway expansion.

The Ministry of Railways is fast-tracking legislation to encourage foreign and domestic firms to invest in railway construction projects, said a spokesman.

For the first time, the ministry plans to give investors more say in ticket and freight pricing, said Wang Yongping.

Other measures include setting up a transparent system to ensure railway companies receive a fair share of ticket revenues.

Meanwhile, three new regulations will be drafted to ensure foreign and domestic investors are clear about how to get into the railway construction and transportation industry, said Wang in a recent interview.

The moves are part of the creation of a new railway financing mechanism, which the ministry hopes will help it fulfill its long-term goals.

By 2020, China plans to build an additional 100,000 kilometres of track at an estimated cost of at least 2 trillion yuan (US$250 billion).

To fund the network's expansion, the ministry needs to find an average of 250 billion yuan (US$31 billion) every year, at least twice the current annual investment in railways.

To bridge the funding gap, the ministry has mapped out a plan to push forward changes in the financing mechanism during the 11th Five Year Plan (2006-10).

As well as attracting increased private foreign and domestic investment, the ministry aims to encourage railway companies to restructure and list on the stock market.

The ministry is also looking into establishing a nationwide railway investment fund, which large investors such as insurance companies could buy into, and increasing the issue of railway construction bonds.

But despite the reforms, investors who complain that the lack of a say in setting train timetables has influenced their returns will be left disappointed the ministry insists that it will retain complete control over network schedules.

"Keeping the railway network as a whole and centralizing timetables will be the prerequisite and base for our reforms," said Wang.

He stressed that only a centralized railway system would improve national productivity, the ultimate aim of the reforms.

In addition, a centralized timetable system would be more efficient and increase profits, he said.

At present, the ministry is setting up a transparent system for financial clearings within the railway industry.

Under the system, investors will be able to get information about their share of revenues from the ministry to help them minimize risks, said Wang.

Transport pricing reforms are also under way, with the aim of setting up a more flexible pricing mechanism.

"For restructured railway companies as well as new jointly invested railways, there will be a flexible pricing mechanism where prices can change within national guidelines," said Wang.

The reform will gradually expand the amount ticket prices can vary by. It is targeted at building a transport price management system in which the market is the key player and national guidelines are only a minor factor, he added.

Besides the reforms, the ministry is also drafting regulations on railway construction, passenger travel and freight.

"We are making efforts to have the regulations listed in the State Council's legislation plan as soon as possible," said Wang.

Through the legislation, the ministry hopes to safeguard investors' rights and specify the government's supervision responsibilities.

The ministry is currently looking for investors both at home and abroad and, so far, it has recommended 43 projects to investors, not 70 as some media had previously reported, said Wang.

The 43 projects include passenger lines between Wuhan and Guangzhou, Shijiazhuang and Taiyuan, and Zhengzhou and Xi'an, which the ministry expects to be profitable as they connect provincial capitals.

In the first seven months of this year, 72.49 billion yuan (US$9.1 billion) was poured into railway construction projects, 73.6 per cent of which came from the ministry itself.

Local governments and private companies provided the other 19.13 billion yuan (US$2.39 billion), 5.5 times as much as they contributed in the same period last year.

(China Daily August 21, 2006)