ADB's Railway Loan to Boost Economic Link in Western PRC

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending a $300 million loan for a railway line that will bolster economic growth in the poor western region of the People's Republic of China (PRC).

The 820-kilometer Lanzhou-Chongqing line will be the first rail link from the northern city of Lanzhou in Gansu province, passing through Shaanxi and Sichuan provinces, to the southern city of Chongqing, a key manufacturing hub and a major exporter to the Greater Mekong Subregion.

It will also become the shortest land route between economic centers in northwest PRC and Chongqing.

Nearly 17 million people live in the project area, many of them poor. Marginalized residents, including women and ethnic minorities, will be given hiring preference to build and operate the railway line, which is estimated to cost $8.6 billion to build.

“The project is expected to stimulate the development of industrial and natural resources and tourism, generate employment, raise living standards and help reduce poverty,” said Manmohan Parkash, Principal Transport Specialist for ADB’s East Asia Department.

As the financing needs are substantial, funds are being tapped from several sources. ADB is providing a 27-year loan from its ordinary capital resources. The assistance is the largest single ADB project loan for PRC this year.

Two of the PRC’s largest banks, China Construction Bank and the Industrial and Commercial Bank of China, will jointly provide $4 billion in loans. PRC’s Ministry of Railways (MOR) and the governments of Gansu, Sichuan and Chongqing will invest $4.3 billion as equity, with MOR contributing 55% of the share, and the local governments providing the rest of the equity investment.

The railway track will be capable of handling double-stack containers, raising its carrying capacity over regular lines, reducing land use, and improving energy efficiency. Over 30 railway stations will be built and state-of-the art safety equipment will be installed.

To help create a ‘green corridor’ along the rail route, ADB will – for the first time – finance environmental protection equipment worth nearly $12 million. A switch in traffic from roads to the new rail link will result in significant cuts in fuel consumption and emissions of harmful carbon dioxide.

The proposed railway is part of PRC government’s strategy to expand infrastructure and stimulate growth in underdeveloped interior regions of the country.

The Lanzhou-Chongqing railway will become an integral part of the railway network to boost connectivity and trade between China and the neighboring Greater Mekong Subregion, and Central Asia and Europe.

A joint venture company has been set up by MOR and the governments of Gansu, Sichuan and Chongqing to build, operate and manage the railway. It will outsource a wide range of services to the private sector, and seek strategic and private investors, given the high costs involved.

ADB is PRC’s leading development partner in the railway sector, providing over $3 billion to build lines and improve safety standards, as well as helping with ongoing sector reforms. In addition, ADB is providing a technical assistance grant of $800,000 to prepare the energy efficiency strategy for the PRC railways and identify ways of improving the energy efficiency of the country’s entire rail network.

At present, railways in the PRC have the highest freight transport density in the world and the second-highest passenger transport density after Japan. While the government has carried out an aggressive network expansion, capacity still lags demand, partly because of system bottlenecks and other constraints.

Under its current railway development plan through to 2020, the government has pledged to remove the constraints, roll out more lines, increase average speed and continue to give priority to areas that are undeveloped and lack transport services.

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