Bloomberg News

China Boosts Rail Spending for Third Time to Revive Growth

September 04, 2012

China boosted plans for spending on railway construction this year to 496 billion yuan ($78 billion), according to China Railway Group Ltd. (601390), as the government seeks to revive flagging economic growth.

Spending on new railways will total at least 67 billion yuan a month until the end of the year, Bai Zhongren, president of state-controlled China Railway Group, told reporters in Hong Kong today. The ministry has funding for the new plan, which is an increase from 470 billion yuan, he said.

“This all shows the government’s determination to boost rail development,” Bai said. “The government and leaders have stressed many times that the nation should have a scientific and sustainable development of railways.”

The new figure, 7.6 percent more than last year’s 461 billion yuan spending, is at least the third increase since the start of July when Premier Wen Jiabao said promoting investment growth is key to stabilizing economic expansion that has fallen to the slowest pace in three years. It also marks a renewed focus on building railways after a fatal crash last year prompted safety concerns and a construction slowdown.

“The government sees that underlying economic activity is continuing to deteriorate, so they have to do more in terms of investment,” said Karen Li, a Hong Kong-based JPMorgan Chase & Co. analyst. Railway investments “will be rolled out in a more aggressive way” in order to meet the new target, she said.

The ministry of railways is also holding a working group meeting next week, which is an unusual time and a sign that funding plans are secure, she said.

China Railway Group and China Railway Construction Corp. (1186), the nation’s biggest builders of railways, both gained in Hong Kong trading. China Railway rose 2.5 percent, the most in two weeks, to HK$2.92 at close of trading while CRCC rose 1.7 percent. The benchmark Hang Seng Index dropped 0.7 percent.

The companies, both based in Beijing, posted declines in first-half profit because of a 39 percent cut in spending on new lines.

To contact the reporter on this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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