China rail investments may absorb cement, steel capacity glut-paper

SHANGHAI, July 23 Tue Jul 23, 2013 7:11am IST

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SHANGHAI, July 23 (Reuters) - China may use investments in high-speed railways to help digest an enduring capacity glut in steel, cement and other construction materials, the official Shanghai Securities News said on Tuesday, citing unnamed sources close to the government.

"Talk about using railway expansion to digest material surplus appears to have some foundation," the newspaper said.

"Railway authorities and the National Development and Reform Commission are studying plans, but no final conclusion has been made," it said.

The newspaper said that the railway department had completed only one third of its planned investment in the first half of this year, so there would be room for a quicker pace of investment in the second half of this year.

The investment could include the world's longest undersea tunnel across the Bohai Strait, linking China's eastern and northeastern regions, worth 260 billion yuan ($42 billion) as previously reported, the newspaper said.

Chinese equity investors frequently react to credible suggestions that more infrastructure spending is on the way, which is seen as boosting revenues at domestic steel and cement companies, among others.

However, Chinese regulators and economists are wary that another round of spending could aggravate existing asset bubbles and price inflation produced by the last round of massive spending Beijing unleashed to offset the impact of the global financial crisis.

By 0135 GMT, shares of China Railway were up 3.1 percent in Hong Kong and 1.2 percent in Shanghai, while China Railway Construction climbed 3 percent in Hong Kong and 2.3 percent in Shanghai. (Reporting by Lu Jianxin and Pete Sweeney; Additional reporting by Clement Tan in SINGAPORE; Editing by Jacqueline Wong)

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