China must reform its rail financing system and further diversify funding sources to close the capital gap for railway construction, economists and industry professionals said yesterday.

Traditional funding sources including government and bank loans have left a capital shortage of 150 billion yuan (US$19.4 billion) for railway tracks to be built before 2010, they said, urging the government to take advantage of alternative sources such as project finance, debt and equity capital markets as well as foreign funds.

The country plans to extend its railway network to about 100,000 km, by 2020 to enable transport capacity to meet the demands generated by economic and social development.

The United States has the world's longest rail network, stretching some 280,000 km.

However, to reach its target, the government needs to spend 2 trillion yuan, and it is currently about 1 trillion yuan short.

Cao Yuanzheng, chief economist at the Bank of China International, said during a statement to the China Rail Financing Summit in Shanghai yesterday: "Despite the progress made to attract capital through other channels, government investment and bank loans are still the predominant sources of funding for the line's construction."

He said the rail system, which is still highly controlled by the State, was troubled by the lack of a clear line between the roles of the government and enterprise, unclear property ownership and a scarcity of up-to-date experiences in corporate development and management.

(China Daily April 18, 2007)