The Ministry of Railways will soon receive over 200 billion yuan in financial support, which will help with debt repayment, advance key projects, and optimize and refine accompanying initiatives. Thanks to this government-backed boost, the railway sector—long plagued by funding challenges—will see a significant easing of its cash crunch.

　　Railway financing is tight.

　　Following the Wenzhou high-speed train accident this July, China's railway construction has faced adjustments, with several lines experiencing delays or even temporary suspensions. Experts note that although China's railway financing initially tightened up, the financial markets currently remain relatively open and accommodative in supporting railway projects. Moreover, as relevant policies are rolled out one after another, the financial sector is expected to continue its robust backing for China's railway development.

　　"Railway construction, as a key national investment project, not only meets the public's growing demand for a modern transportation system but also addresses critical issues such as employment opportunities for millions of migrant workers and the development of supplier industries. Large-scale, prolonged delays or suspensions in construction are far from normal and urgently need to be addressed," noted Luo Renjian, a researcher at the China Development Research Foundation’s Institute of Integrated Transport.

　　Policy supports Railway Ministry bonds

　　There are signs that the railway sector's "financing thirst" has eased somewhat since entering October. On October 12, the Ministry of Railways officially launched the first tranche of its 20 billion yuan China Railway Construction Bonds for public issuance this year. Thanks to a series of supportive policies—such as halving corporate income tax on interest earned from railway construction bonds and explicitly classifying these bonds as government-backed securities—market confidence and recognition of the Ministry of Railways' bonds have surged dramatically. As a result, by October 26, the second tranche of 20 billion yuan in railway construction bonds was oversubscribed by nearly 17 times.

　　The industry is optimistic about the prospects for railway construction.

　　"I am fully confident in the future development of China’s railways. As far as I know, the medium- to long-term railway network plan approved by the State Council remains unchanged. Although China Railway’s financial capacity has been weaker compared to previous years since 2011—largely due to broader global macroeconomic factors—I remain optimistic," said Zhao Xiaogang, Chairman of CRRC South.

　　■ Synergistic Effect

　　South Car and North Car Receive 10.5 Billion Yuan in Outstanding Payments from the Ministry of Railways

　　The Railway Ministry, recently awarded a massive influx of funding, has resumed delayed payments to suppliers; both companies' largest customers are the Railway Ministry.

　　The Ministry of Railways, which recently secured a massive influx of funding, has already begun processing delayed payments to suppliers. Both China South Locomotive & Rolling Stock Corporation and China Northern Locomotive & Rolling Stock Industry Group have received "big bonuses"—the first batch of repayments totaling 10.5 billion yuan from the Ministry of Railways.

　　Railway Ministry "Delivers Charcoal in the Snow"

　　Yesterday, China South Locomotive & Rolling Stock Corporation (CSR) announced that it has received nearly 6 billion yuan in accounts receivable from the Ministry of Railways, which will positively impact the company’s financial health. The company expects to recover most of the outstanding payments from the Ministry by November or December of this year.

　　A source from China South Locomotive & Rolling Stock Corporation (CSR) stated that railway equipment manufacturers typically experience concentrated payments in the fourth quarter, a practice that has become a longstanding industry norm. Additionally, senior officials have been actively coordinating with banks and railway authorities to facilitate loan arrangements and financing solutions. Against this backdrop, the Ministry of Railways is expected to accelerate its payment of outstanding dues to CSR between November and December. Meanwhile, reports indicate that the Ministry of Railways has also recently settled an overdue payment of 4.5 billion yuan to China Northern Locomotive & Rolling Stock Corporation (CNR). These two major repayments—totaling 10.5 billion yuan—will serve as a much-needed lifeline for both CSR and CNR, which have been grappling with tight cash flows this year.

　　China South Locomotive's financial report for the first three quarters shows that the company's accounts receivable increased by 23.914 billion yuan compared to the beginning of the year, representing a growth rate of 213.91%—far exceeding the 35.57% increase in revenue during the same period. In its quarterly report, China South Locomotive attributed the significant rise in accounts receivable primarily to the natural growth driven by higher sales revenue this quarter, as well as delayed payments from key customers.

　　China North Car's third-quarter report showed results similar to those of its competitors. The company reported a net profit of 2.193 billion yuan for the first three quarters, an increase of nearly 800 million yuan compared to the same period last year. However, accounts receivable surged by 13.7 billion yuan from the beginning of the year, representing a growth rate of 126.2%. Meanwhile, the company’s net cash flow from operating activities turned into a net outflow of 10.176 billion yuan, a significant increase of 8.45 billion yuan compared to the same period last year.

　　Both companies' stock prices rose sharply.

　　It is understood that the primary customers of China South Locomotive & Rolling Stock Corporation and China Northern Locomotive & Rolling Stock Industry Group are both the Ministry of Railways and its affiliated railway bureaus. "The delay in payment by these major clients essentially refers to the Ministry of Railways, the two companies' largest customer," a source from the railway industry once told reporters. This situation also gives the Ministry of Railways significant leverage over repayment timelines for products like high-speed trains and passenger coaches.

　　Huabao Securities' research report highlights that, due to the lingering impact of the Wenzhou high-speed train accident, railway construction funding has tightened. Combined with the country's tight monetary policy, listed railway companies are facing increasingly strained cash flows and a significant drop in operating cash generation, putting substantial liquidity pressure on these firms.

　　For China South Locomotive, yesterday brought another piece of good news— the company’s refinancing plan has received approval from the State-owned Assets Supervision and Administration Commission.

　　According to the plan approved by the State-owned Assets Supervision and Administration Commission, the non-public offering price for CRRC Group this time is set at 4.46 yuan, with the targeted subscribers limited to no more than ten entities. The total funds raised will amount to 9 billion yuan. China South Rail will present the new refinancing proposal for consideration at its shareholder meeting on November 7, following the earlier non-public offering plan that originally aimed to raise 11 billion yuan.

　　Yesterday, shares of China South Locomotive & Rolling Stock Corporation and China Northern Locomotive & Rolling Stock Industry Group both rose. China South Locomotive closed at 5.56 yuan, up 1.46%, while China Northern currently trades at 5.25 yuan, gaining 0.57%.