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System needs to improve as private funds eye railway
Aggregated Source: Shanghai Daily: Business

CHINA should improve its fare and legal systems as the private sector is set to be more involved in the country's railway industry, a senior industry official said, as global transport leaders call for more spending in infrastructure amid tight government budgets.

The expansion of China's massive high-speed rail network was mainly financed by debts issued by the former Ministry of Railways which acted as a corporation in the bond market before it was split into two entities early this year.

"I expect some change, but not until a reform in the fare system which can ensure investment return, otherwise no one would be interested," said Zhou Jichang, who was until last month chairman of China Communications Construction Co, a port and road builder, yesterday.

To attract private investors "the government also has to improve its legal framework to safeguard their interests," Zhou said in an interview in Leipzig, Germany, at the annual summit of the Organization for Economic Cooperation and Development's International Transport Forum.

He cited the highway sector as an example. The central government has successfully brought in private-sector financing in highways via the BOT (build-operate-transfer) method under which an entity receives a concession to finance, construct and operate a facility. That has resulted in only 20 percent of China's 98,000 kilometers of highways today being funded by the central government, and the rest by the private sector or local governments, he said.

But the central government's decision to cancel charges on toll roads during national holidays is against investor interests. Zhou's company is not involved in railway so far.

Zhou made his remarks as transport ministers from the 54 member countries of the ITF agreed yesterday on a joint declaration calling for more investment as funding is a major challenge in transport policy.

Private sector funds are needed in transport infrastructure - metros, railway and buses - as they are key in driving long-term economic growth, according to the OECD.

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