FACED WITH rapidly increasing estimates for the cost of building the long-planned high speed line between Beijing and Shanghai, the Chinese Ministry of Railways has decided to form a Special Purpose Vehicle to finance the project.

Under development for more than 10 years, the 1 318 km line was originally expected to cost 110bn yuan. The feasibility study approved by the State Council in September puts the cost at 170bn yuan, but the final figure is expected to reach 220bn as a result of increased prices for land and materials. Preliminary work on the line – now to be laid out for 350 km/h operation – is expected to start before the end of this year, with the hope that the first sections will be ready to carry passengers by 2010.

On October 25 the ministry announced that the Beijing – Shanghai High Speed Railway Corp would be established by the end of this year, with a planned equity capital of 110bn yuan. Of this 40bn is to be provided by the Chinese government, with a further 20bn coming from the provincial governments of Hebei, Shandong, Anhui and Jiangsu plus the municipalities of Beijing, Shanghai and Tianjin.

Five institutional investors will each provide 10bn yuan. Four of these are state-controlled: the Bank of China, Industrial & Commercial Bank of China, China Construction Bank, and the National Council for Social Security Fund. The fifth will be an external investor, and several major insurance companies have expressed interest.

In addition to the equity capital, Bshsrc will raise 110bn yuan in commercial debt through bonds and loans. With an end-to-end journey time of around 5 h, the line is forecast to carry up to 80 million passengers a year. With single fares averaging 600 to 700 yuan, the debts would be paid off after around 10 years of operation, according to the ministry.

  • A €1bn order for 40 high speed trains was signed by China's Ministry of Railways and Bombardier Sifang Power (Qingdao) Transportation Ltd on October 31. To be built at Qingdao, the 16-car sets will be 430 m long and capable of speeds up to 250 km/h. The order includes 20 sets with sleeping cars for overnight services, which will be derived from Bombardier's Zefiro family. The other 20 will be longer versions of the eight-car CRH1 trainsets now being delivered to Chinese Railways under orders placed in October 2004 and May 2005.