World Bank: Suggestions for China’s Expanding High-Speed Rail Development

March 18, 2016Chinaby EW News Desk Team

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China has developed the largest high-speed rail network in the world, a feat for which it should be rightly proud. Unfortunately, cutting-edge transportation technology is expensive to deploy and maintain.

A nation with the world’s second largest economy and single largest population needs to build additional high-speed rail to support its burgeoning infrastructure. As a result, China has asked the World Bank for suggestions on how it can finance further development.

In response, the World Bank has offered three general proposals. The China Railways Corporation (CRC) can reorganize, diversify, sell stock, or liquefy assets. China’s unique socio-economic structure has made options that would seem obvious in a more patently free-market economy.

According to a report on Out-Law.com, the World Bank put together a series of 15 case studies, covering China, France, India, Japan, Poland, Russia, the United Kingdom, and the United States. The studies delve into all of the finance tools that worked for each nation and provide suggestions for how to implement each one successfully.

Complicating matters are the unique nature of the railway industry in other economies and China’s unique socio-political situation. Railways in other countries have used a wide variety of strategies to streamline operations, raise capital, and cut expenses.

In every case, however, these successful entities were able to show their investors that profit was possible and commensurate with the level of risk they had assumed when they bought shares.

China’s unique mix of communism and market economics, however, creates considerations that other nations have not had to face. As a result, the World Bank has proposed these 15 case studies to allow the nation with the world’s second largest economy to pick and choose the techniques that are most likely to work for it.

Martha Lawrence, the World Bank’s Senior Railway Specialist said: "We are responding to CRC's interest to explore new capital sources, and suggesting different financing channels as a way to leverage the value of its assets and introduce market-based business models to the sector."

Some of the proposals include things that would be second nature to American businesses, including reorganization (such as might occur after a corporate bankruptcy), selling stock, bringing in industry partners, repurposing its land holdings to generate passive income (such as leasing CRC owned land to utility companies to run their lines), selling off assets, and many others.

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