Chinese authorities have agreed to take steps to secure financial support for major cash-strapped railway projects in the country's latest move to help the crippled sector, China Securities Journal reported on Friday.
The move follows a policy instituted earlier this month by the Ministry of Finance to halve the tax on the interest earnings of bonds issued by the Ministry of Railways (MOR) between the 2011-2013 period, in a bid to make the bonds more attractive.
China's railway projects have embraced a binge since the country rolled out a stimulus plan worth four trillion yuan (618.4 billion U.S. dollars) to counter the financial crisis of 2008, leaving the sector with a huge appetite for cash now to fuel ongoing work.
But the industry has been hit hard recently as China has tightened its belt on the monetary market, causing delays for 70 percent of planned projects, according to a survey conducted by Chnrailway.com, a leading railway website in China.
To curb soaring inflation, China has raised banks' reserve requirement ratio six times this year and hiked interest rates three times in a bid to check excessive lending.
"The financial crunch has caused two problems for the railways sector. One is that project delays will increase costs, another is that staff wages, mostly for migrant workers, can not be paid on time," the paper cited an anonymous source with the MOR as saying.
With cash restraints and the suspension of new railway project approvals announced by the government in a bid to calm public outrage following a deadly crash on a high-speed rail line in July, investment in the MOR has experienced a sharp decline.
The latest statistics from the MOR suggest that the MOR's investment in fixed assets totalled 357.72 billion yuan in the first eight months, down 11.5 percent over the same period last year.
Investment has also exhibited a downward trend on a monthly basis, with investment in June, July and August standing at 58.1 billion, 44.3 billion and 35.3 billion yuan, respectively, which in turn slowed down construction.
The anonymous source told reporters that China's State Council, or China's Cabinet, is working with relevant authorities on measures to ensure an "appropriate construction speed" for the railways, adding that some financial institutions have promised to take action.