China boosts railway spending to help reverse slowing economic growth

CHINA's Ministry of Railways has announced plans to raise spending on railways and bridges this year to CNY470 billion (US$74 billion), according to a bond prospectus, reports Bloomberg.

This marks the second increase in July for a combined 14 per cent rise in planned railway spending compared to earlier announced figures for the year. A prospectus dated July 3 that said planned spending for 2012 was CNY406 billion, Bloomberg reports.

It said the Ministry of Railways also plans to sell CNY22 billion in 10-year bonds and CNY5 billion in 15-year bonds, according to the prospectus posted to the Chinese government's bond clearinghouse website.

Furthermore, China's State Council said it will publish a list of projects in industries including railways, utilities, telecommunications and health care for private investors to join.

The new railway spending target surpasses 2011's CNY461 billion in spending and follows Premier Wen Jiabao's July 10 comments that promoting greater investment is the key now to stabilising the nation' s economic expansion, after GDP growth slowed to 7.6 per cent in the second quarter, the lowest level in three years.

"China is selectively upscaling the stimulus," said Lu Zhengwei, chief economist with Industrial Bank Co in Shanghai. "Premier Wen Jiabao said China will do something to boost confidence, and this is fresh evidence." Mr Lu predicts the nation' s economic growth hit bottom in the second quarter and will rebound to 7.8 per cent in the third quarter.

The report added that China's railway investment slowed last year from 2010's CNY707 billion with the ousting of former Minister Liu Zhijun in a corruption investigation in February 2011 and a high-speed train crash near the eastern city of Wenzhou in July that claimed 40 lives.