Railway ministry's revamp may expand sources of private funding
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E-mail Shanghai Daily, March 12, 2013
China's plan to revamp its Ministry of Railways may benefit railway equipment makers as the reform could encourage more funds from the private sector.
The Ministry of Railways will be split into two entities - with the regulatory and administrative functions transferred to the Ministry of Transport and commercial operations to a new state-owned company, the government said over the weekend.
The revamp is part of government efforts to reduce bureaucracy and improve efficiency in the hugely-indebted and corruption-plagued ministry, which serves as both an industry watchdog and a service provider and is also China's biggest issuer of corporate notes. But no details of the revamp have been released yet.
"The reform could help broaden the sources of funding for railway construction and be positive to rail equipment makers in terms of demand and earnings," Guotai Junan Securities said in a note.
CSR Corp, China's leading train maker, rose 2.76 percent before closing 0.85 percent higher at 4.75 yuan (76 US cents) yesterday, while China Railway Group, the leading rail builder, added 0.66 percent to 3.07 yuan. The Shanghai Composite Index fell 0.35 percent.
Fitch Ratings said the reorganization won't impact the ratings of China Railway Group because of the company's strategic importance to China. It also added the group along with China Railway Construction Corp will remain key railway construction companies in the country.
Fitch also said it believes the proposed restructuring will not change the strategic importance of rail transport in China. The ministry accounts for the bulk of China Railway Group's revenue.
The reorganization won't hit investment in railway building, said Railways Minister Sheng Guangzu, who took over in 2011 after former chief Liu Zhijun was ousted for corruption.
