China's once profitable railways record USD 900bn debt amid push for expansion
Beijing [China], July 8 (ANI): What was once China's profitable high-speed railways is now heading towards a trillion-dollar disaster after reports of debt nearing a whopping USD 900 billion.
ANI
Jul 08, 2022 06:57 IST
Beijing [China], July 8 (ANI): What was once China's profitable high-speed railways is now heading towards a trillion-dollar disaster after reports of debt nearing a whopping USD 900 billion.
Even in the face of mounting debt, China State Railway Group is doubling down on its expansion of what is already the world's largest high-speed rail network, Nikkei Asia newspaper reported.
China's high-speed rail network exceeds 40,000 kilometres and the network's expansion shows little sign of slowing. China Railway plans to reach 50,000 km in 2025 and 70,000 km in 2035 -- a roughly 70 per cent jump from 2021, the report said.
This rapid growth comes as regional governments compete to attract new projects, in hopes of creating jobs and fostering related businesses. As the government ramps up efforts to bring the Chinese economy back on track, the aggressive campaign has added to the state-owned operator's total liabilities, which as of the end of 2021 reached USD 882 billion (5.91 trillion yuan).
This alarming figure is around 5 per cent of China's gross domestic product. The Japanese newspaper said concerns over China's "hidden debt" loom over its economic outlook, as the figure is only expected to grow.
"The government's priority is economic growth and it doesn't care about debt repayment, but each kilometre of railway costs 120 million yuan to 130 million yuan to build," said Zhao Jian, a professor at Beijing Jiaotong University and an expert on transportation. This means a 30,000-km expansion will require roughly 3.6 trillion yuan, the report said.
According to Nikkei Asia, China Railway is selling bonds to state-owned banks and brokerages to cover the cost. Earlier in May, the Chinese government announced comprehensive economic stimulus measures to lift the covid-hit economy, including allowing China Railway to issue another 300 billion yuan worth of railway construction bonds.
Such is the case of the "hidden debt" that the government borrows money without adding to the official national debt. China Railway's total liabilities grew 4 per cent in 2021 to 5.91 trillion yuan, according to its financial report. (ANI)
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