State Council guideline encourages private investment in China’s railways

China is encouraging private sector participation in its railways as part of efforts to enhance the integration and openness of the transport industry amid a logistical revamp aimed at improving supply chain efficiency.

According to a guideline released by the State Council, China’s cabinet, on Monday, the world’s second-largest economy plans to reform natural monopolies in the transport sector – caused by high infrastructure costs and barriers to entry – by diversifying the range of service providers and fostering moderate market competition.

The investment of private capital in railway construction and operations will be encouraged, and locally controlled railway companies will be granted autonomy to determine their operational models.

Financial institutions and private investors will also be encouraged to fund the construction of transport infrastructure and establish investment funds for the sector.

The ultimate goal is to achieve savings of over 1 trillion yuan (US$137 billion) in the logistics chain, which would help strengthen China’s manufacturing industries and reinforce the chain’s role in driving domestic demand amid heightened external uncertainties.