China To Cut 100B Yuan From High-Speed Rail Buildout

The cut in the railway ministry’s infrastructure budget for this year is 100 billion yuan ($15.4 billion), according to He Huawu, the ministry’s chief engineer, Caijing reports. The Economic Observer had earlier reported that twice that amount had been cut from the 700 million yuan budget, with the ministry saying only that the number was inaccurate. He’s number still represents a 14.3% cut, and is evidence that some projects in the buildout of the much-criticized and scandal-plagued high-speed rail network will be halted, more particularly that some not started will be shelved.

Companies run by the ministry reported a 3.8 billion yuan loss in the first quarter of this year, the ministry has announced. The loss covers operating costs; surging fuel prices were a contributory factor and another reason that railways minister Sheng Guangzu has proposed slowing the speed of high-speed trains to cut costs. Higher steel prices would have raised construction costs, too.

While the ministry has not announced its full-year results for 2010, Caixin quotes a figure of 20 billion yuan and says a larger loss is expected for this year.

Total debt was 2 trillion yuan at the end of the first quarter, mostly incurred in the buildout of the high-speed rail network, against 3.4 trillion of assets, a 58% debt ratio that is higher than the number Sheng had given in March. Fixed-asset investment totaled 121.6 billion yuan at the end of the first quarter, up 36.5% from a year earlier. It is impossible to tell from those numbers if the slow down in the buildout has yet started.

Update: The Ministry of Railways has confirmed that its infrastructure budget will be 600 billion yuan this year, which would be a 100 billion yuan cut on the previously announced number. Total investment, at 745.5 billion yuan, will be 12% less than initially planned.

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2 responses to “China To Cut 100B Yuan From High-Speed Rail Buildout

  1. Pingback: JP Morgan tries again to gain power in China « Lettersfromitia's Blog

  2. Pingback: China’s Railways Said To Sacrifice Safety For Speed | China Bystander

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