CHINA TO ALLOW FOREIGN INVESTMENT IN RAILROADS
The Beijing government said it will allow foreigners to invest in building railroads in China, and in companies that ship freight by rail, the New York Times reported.
China has already permitted foreign investment in its airlines. Authorities have promised to do the same for trucking after China enters the World Trade Organization. The central government has balked until now on the issue of opening railroads to investors abroad.
The issue is sensitive because most of China’s freight moves by rail, since the country lacks a national network of highways — although one has been planned. Shippers using China’s railroads often complain of difficulties in tracking cargo. Often, shipments disappear without explanation.
Under its new policy, the Beijing government will allow foreign companies to take minority shares in joint ventures within three years, and to hold a majority stake within six years. Foreign companies may build railroads and operate them for periods up to 22 years, before turning them over to the government.
The new leeway is only for freight. Foreigners are still forbidden to invest in passenger lines. Most Chinese travel by rail within their country.
Foreigners built the first railroads in China, the earliest being a nine-mile line that connected Shanghai with the Yangtze River in 1876. Investors from France, Germany, Japan, and the United States bought bonds in subsequent Chinese rail companies. After the Communist-led government came to power in 1949 and nationalized China’s railroads, litigation over defaulted bonds continued until 1987, when the U.S. Supreme Court refused to hear the appeal of a lower court ruling that was favorable to China.