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The first-ever railway to be built with privately invested shares is expected to break ground in East China this year - a key move in the finance and investment system in the previously government-monopolized sector.

Wang Min, director of the Plan-ning Department of the Ministry of Railways, said the Quzhou-Chang-shan railway project in Zhejiang Province has been planned by his ministry and will be built this year.

Changshan Cement Co Ltd, a locally privately-owned company, holds 32.5 per cent shares in the total investment of the railway project, according to Sun Qin, director of the office for the project's preparation.

The other investors are the Ministry of Railways and Changshan County government with the proportion of their share holdings respectively being 35 and 32.5 per cent, Sun said.

The railway sector is among a few of the industries that remain a government monopoly in China.

The construction capital of the nation's railway network mainly depends on government input, including railway construction funds from the central government, the loan from the State Development Bank and economic input from local government.

Only around 1,000 kilometres railways are built every year due to the shortage of capital, which has constituted a bottleneck for the nation's rapid economic growth.

Statistics from the Ministry of Railways indicate the nation's total investment in the construction of railway systems per year is less than 60 billion yuan (US$7.3 billion).

According to the plan, the 45-kilometre railways needs a total of 775 million yuan (US$ 93.7 million) in investment, Sun said.

"The railway project to be built is small in its size and investment, but it is considered a pilot project for reforming the highly-monopolized system of financing and investment system in the sector," he said.

Vice-Minister of Railways Wang Zhaocheng was quoted by Fuzhou-based Dongnan Kuaibao newspaper as saying the project is expected to "create a good experience" for the private capital injected into railway construction.

Since a minor step in the reform of the industry might affect the overall economic development, railway authorities have been too cautious to map out a well-accepted reform programme since the nation proposed the idea of reform in 2000.

Although the Ministry of Railways has been working to improve the efficiency of its railway network, complaints of hesitation in breaking up the monopoly in the sector have often been heard.

The existing system has placed a barrier to more capital in the construction and renovation of the railway network, said Lin Yueqin, an economic researcher with the Chinese Academy of Social Sciences.

Some experts are cautiously optimistic about the project's role in the sector's future reform.

"Time is still needed to examine whether the Quzhou-Changshan railway can serve as a model for the reform of the long-lasting monopolized sector," a researcher from the China Academy of Railway Sciences said.

Early last month, Railways Minister Liu Zhijun said at a national working conference that his ministry is trying to attract more investment entities into the area to expand the rail track coverage.

"Market access will be widened to enterprises to encourage them to invest their capital into the railway projects," Liu said.