Railway construction bonds valued at a minimum of 16 billion yuan (US$2 billion) are to be issued by China's Ministry of Railways to raise finance for network expansion projects. The size of the issue could increase to 20 billion yuan if there's over subscription, states the prospectus published in Thursday's China Securities Journal.

The bond maturity periods are seven, 10 and 20 years and they carry an annual interest rate of between 4 and 4.25 percent. The bonds are being underwritten by CITIC Securities Limited.

Projects to be financed by the bonds include a high-speed rail linking Beijing and the city's nearest seaport Tianjin and a passenger-only line between Zhengzhou, capital of central China's Henan Province and Xi'an, a major tourist center in neighboring Shaanxi Province.

Under China's 11th five-year plan (2006-2010) the rail network will be extended by 17,000 kilometers at an estimated cost of 1.25 trillion yuan.

As the ministry's monopoly over railway operation bars any meaningful participation of private investors much of the funding comes from bank loans and bonds. In September the ministry signed an agreement with the China Development Bank, a state-owned policy bank, for a 250 billion yuan loan over the next five years.

(Xinhua News Agency October 13, 2006)