On the right track to railway reform

In a sign of further reforms in the country's rail sector, China Shenhua Energy hopes to invest more than 10 billion yuan (HK$12.23 billion) in coal rail projects.

Shenhua, the Hong Kong- and Shanghai-listed unit of Shenhua Group, the mainland's biggest coal producer, was in talks with the Ministry of Railways to invest in new rail projects, said Zhang Xiwu, chairman of the state-controlled firm. "The ministry is liberalising private investment in rail projects," he said.

The company had already invested in the Jitong railway in Inner Mongolia, Zhang said. He said Shenhua had a plan to increase its coal railway network from 1,600 kilometres at present to 3,170 killometres by 2015.

Jefferies analyst Julian Bu said: "The railways ministry has almost 100 per cent control of rail projects. Because the ministry is heavily in debt, the trend is that over time China will liberalise this sector. The ministry is being forced to relinquish part of its control over rail projects."

The ministry suffered an after-tax loss of 8.8 billion yuan in the first half of the year as it struggled to cope with rising operating costs and mounting debts, financial magazine said in a report on its website, citing official figures.

The ministry's debt-to-assets ratio climbed to 61 per cent at the end of June, it said.