March 21, 2018 / 12:33 AM / a month ago

China places curbs on urban rail projects, warns against 'blind investment'

SHANGHAI (Reuters) - China will stop cities with under-utilised urban rail systems from increasing capacity and will urge local authorities to improve guidance to stop “blind investment”, in a move to curb debt risks wrought from city-level infrastructure spending.

A member of the security personnel stands on duty on an empty train platform inside a station on the Subway Line Number 1 in Beijing, China, February 7, 2016. REUTERS/Jason Lee

The instructions came from the country’s top economic regulator, the National Development and Reform Commission (NDRC), which issued a statement on Tuesday asking provincial-level governments to strictly control the increase of new vehicles for urban rail projects.

Cities with a vehicle capacity utilisation rate below 80 percent on average will not be allowed to increase capacity, the NDRC said.

China has been in the grips of a metro-building binge with more than 50 cities working on over 1 trillion yuan ($150.8 billion) worth of projects, although a number of them have been halted following warnings from the NDRC.

Such infrastructure spending has helped to shore up economic growth but is now being scrutinised more closely after the government pledged to clamp down on financial risks. Policymakers have warned about the risk of asset bubbles due to high levels of corporate and household debt in the economy.

The state-run China Daily, citing an unnamed NDRC official, on Wednesday reported local governments will be asked to calculate the data which would then be collected by the regulator to improve supervision.

The newspaper also said, citing people familiar with the matter, that the NDRC was revising benchmarks for urban rail project approvals with a view to improve standards to curb financial risks.

FILE PHOTO: The national flag of China flutters behind a fence of the headquarters of the National Development and Reform Commission (NDRC) in Beijing, in this picture taken July 12, 2013. REUTERS/Kim Kyung-Hoon

Reporting by Brenda Goh; Editing by Sam Holmes

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