The State Council, China's cabinet, recently announced that it is in the processes of hashing out railway financing reforms aimed at giving private capital a stake in certain railway projects - including feeder lines and intercity rail networks.

The potential outcomes of introducing private funding into China's rail system are still anyone's guess. Many investors are rightfully worried about the national rail operator's investment scope and profitability - not to mention its willingness to communicate honestly and openly with the market.

China Railway Corporation held 4.56 trillion yuan ($742 billion) in registered capital at the end of the first quarter, when its total debt also stood at 2.84 trillion yuan; meaning that it was still reliant on loans and bonds to fund operations. Meanwhile the company has yet to say which projects will be eligible to receive private capital. Unless investors know where their money is going, they will be at the rail provider's mercy.

The author is Qi Hui, a commentator.

Source: Economic Daily