Dec 13, 2011

Ways for China's rail network to be self-reliant

Despite China's debt-laden Ministry of Railways struggling to finance the construction of its high-speed railway network, global consulting firm A.T. Kearney said the railway system can still yield enough profits and cash-flow to survive.
The ministry's debt ratio may reach 65 percent in 2011, exceeding the alarm line of 60 percent, according to A.T. Kearney.
While some experts suggest that the central government shoulder the Ministry's huge debt, Li Jian, principal of A.T Kearney China, suggested that the Ministry cooperate with private capital and try to find alternative ways to list its assets.
Li said private companies, especially those in countries that boost mature high-speed rail networks, are experienced in financing, network operation and providing good-quality service. However, China's railway system is a mystery to the outside world, he added.
In addition to private capital, he said Beijing-Shanghai High Speed Railway could be a good asset for listing as the railway line, linking China's top two economic hubs, is certain to generate revenue.
He suggested China set special listing regulations for companies holding railway assets because of their not-for-profit nature.
China's unique high-speed rail development and financing environment made it imperative to enhance railway network operations, according to A.T. Kearney.
The consulting firm said that the Ministry could improve train frequencies and ticket prices to generate more revenue. Currently, China's high-speed train ticket prices and frequencies do not change according to different time periods.
Differentiated services and frequent flyer programs could also generate more money, according to A.T. Kearney.
In China, railway-related services are mainly provided before travel or during the process and post-travel services, such as car rentals, are still underdeveloped. This is where revenue could come from, said Li.
Source - China Daily

 

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