China: Ministry Of Railways Lost 3.76 Billion In Q1, Debt Reached 2 Trillion5 May, 2011, 12:04. Posted by Zarathustra
Tags: Economy, High-speed Rail, Infrastructure
China’s Ministry of Railways and its associated companies have a mountain of debt (see 10 reasons to short China), quite simply because of the over-aggressive expansion of the high-speed rail. Now, the ministry’s disclosure confirms that the Ministry and its associated companies have lost RMB3.76 billion in the first quarter of 2011. Despite earlier rumour that the ministry will cut investment plans, the ministry denies it.
The representatives of the ministry said the main cause of the loss was increasing prices of diesel, steel and other parts and materials. Previously some suggested that the ministry will cut investment by RMB200 billion, yet the ministry denied it. The latest disclosure also shows that the ministry has RMB1.983 trillion of debt, slightly higher than the RMB1.8 trillion that we have already known, while the total asset amounts to RMB3.4 trillion.
This is hardly surprising. The infrastructure expansion in China was obviously too aggressive, and the problems with high-speed rail is that it is too expensive for most people, so it is destined to be under-utilised, so it is unclear if the ministry can make enough money in the long-run to service and repay its debt. On a more positive side, it is a good thing that the ministry disclose some numbers to the public, even those numbers were hardly reassuring.