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Four banks jump into railway investment

By Tu Lei (chinadaily.com.cn)
Updated: 2008-12-02 15:30

The 2-trillion-yuan ($293 billion) investment in the newly-planned railway construction under China's $586 billion stimulus plan has triggered big banks to jump in and pour money into infrastructure projects, according to Tuesday's Shanghai Securities News.

On November 28, the Bank of China and Agricultural Bank of China (ABC) signed strategic cooperation agreements with the Ministry of Railways. ABC promised it will provide 500 billion yuan of the financing quota intention in three years, and the Bank of China said it would support the ministry's developments.

Special coverage: Fiscal Stimulus Package Related readings:  More rail bonds to fund investment spree  $730b plan to expand railways  Bank giants back rail construction plans  China to invest $17.6b in 2nd railway for Xinjiang

Previously, the ministry also contacted China Construction Bank (CCB), and Industrial and Commercial Bank of China (ICBC).

CCB Chairman Guo Shuqing said the bank will also take part in this large-scale railway construction, providing superior financial services and business support. CCB also promised to expand fundraising to accelerate the constructions.

On November 24, ICBC, China's largest bank by assets, signed an agreement with the ministry, making it the preferred lender for railway infrastructure projects. ICBC said it would provide the ministry with a wide range of quality financing services in many business sectors.

In addition, the China Development Bank, currently undergoing reforms, also said it will increase loans to support key infrastructure investment and enhance 22 railways' approvals including the Beijing-Shijiazhuang Passenger Dedicated Line and Guizhou-Guangzhou railway projects.

A bank analyst speaking on condition of anonymity said, due to comparative small risks, banks are more willing to support government infrastructure investments amid the real economy downturn.

In fact, railway investment has always been a favored project of banks. For the Beijing-Shanghai High-speed railway, banks loan more than 100 billion yuan in construction funds as planned, but the promised sum from banks have surpassed that, reaching 260 billion yuan by April of this year.

However, experts warn banks should be careful of high risks as investment soars. Zhao Jian, professor from Beijing Jiaotong University, said high-speed railways construction may trigger risks on fiscal, technology and markets due to rising costs, complex technologies and expensive tickets.