“The size of bank loans to the high-speed rail industry is clearly too big and too concentrated.” That was the revelation this week from none other than the China Banking Regulatory Commission (CBRC). China’s gargantuan binge of railway spending has captured the world’s attention, but as WiC reported in issue 82, fears have risen that many of the lines will be unable to repay their bank borrowings. Yan Qingmin, deputy chairman at the CBRC, indicates that rail operators could also face tighter credit conditions. “Bank loans to high-speed rail should not be policy-based,” said Yan, overturning the earlier orthodoxy. Instead, he says lenders like ICBC should grant railway loans only to projects where cashflow and profitability can be assessed (which says something about earlier lending, perhaps). Meanwhile, the new railways minister Sheng Guangzu denied there was a problem. Sheng told delegates at the NPC that the railway companies had combined borrowings of Rmb1.8 trillion, but that their debt to asset ratio was “relatively low” compared to other state-owned firms. “Ongoing development of the railways is necessary,” Sheng told the Beijing News. “It is normal to carry debts, so the public should breathe a sigh of relief.”
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.