The situation affects millions of migrant workers hired to lay new track, say experts, who also warn that the country's new roads are facing similar financial problems.
"An estimated 6 million migrant workers are employed by rail projects nationwide. If the projects cannot resume soon, these people and their families will all suffer," said Wang Mengshu, deputy chief engineer at China Railway Tunnel Group.
According to Wang, rail projects spanning a total of more than 10,000 kilometers, including 5,400 km of tunnels, have been suspended due to a shortage of funds and many migrant workers have not been paid for six months.
The rail construction companies also owe big sums of money to cement and steel suppliers, he added.
"The central government should make investments, pay the workers and suppliers, and complete the ongoing projects," Wang said.
Both the Ministry of Railways and China Railway Group declined to comment when contacted by China Daily on Tuesday.
Wang said one of the reasons for the halting of rail projects is that the central government has tightened its monetary stance to curb soaring inflation. China has raised the reserve requirement ratio for banks nine times this year and hiked interest rates five times to check excessive lending.
Also, doubts about high-speed railway technologies and management in the wake of a deadly bullet train crash in July have resulted in banks taking a more cautious attitude, Wang said.
"The general environment for the high-speed railway industry is not good," said a source with China Railway First Group, a railway construction company.
"With money from the stimulus plan worth 4 trillion yuan ($627 billion) drying up this year and its difficulty in securing bank loans, the rail sector is facing a capital chain rupture," said Zhao Jian, a professor of transport at
In a bid to help the crippled sector, authorities have agreed to take steps to secure financial support for major cash-strapped railway projects, Xinhua News Agency reported.
The Ministry of Finance instituted a policy earlier this month to halve the tax on the interest earnings of bonds issued by the Ministry of Railways between the 2011-2013 period, in a bid to make the bonds more attractive.
The shortage of funds is also affecting the construction of new roads, the Ministry of Transport said in a report on Monday.
"Some provinces have had no money to pay construction companies for two to three months, and a few projects are completely or partly suspended," the report said, adding that as a result, 20 percent of the work planned for this year may not be completed on time.
The ministry forecast that the funds shortage could get worse in the fourth quarter this year, adding that it will try to secure funds for some projects and suspend others.
The China Banking Regulatory Commission warned banks in late July of the risks associated with loans to the railway and road sectors.
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