The Asian Development Bank (ADB) has approved its largest-ever loan to the People’s Republic of China – for US$500mn – to help finance the missing link in one of the main east-west railway routes, thus relieving a serious bottleneck in the rail network.
The project will construct 377km of electrified single-track railway between Yichang in Hubei Province and Wanzhou in Chongqing Municipality, together with power facilities, freight yards, signalling and communications, maintenance and container handling equipment, and train control systems.
Some 24 new stations will be opened along the route and two existing ones expanded.
The railway will shorten various routes across the north-south and east-west axes of the PRC, providing the fastest land link between Shanghai on the east coast and Chengdu and Chongqing, key growth areas in the west.
“In line with the government’s western development strategy, the project will provide less costly, more reliable and safe transport between major economic centers, promoting economic development in the isolated project areas along the way,” says Hiromi Sakurai, an ADB financial specialist.
“A shorter east-west route will also increase the transport capacity in the central corridor and the flow of goods and people, so that not only railway users, but also the nationwide producers and consumers will benefit from better, more, and faster trade.”
The track will run through eight counties, five of them poor, across rugged terrain. The poor interior regions in the PRC have not benefited as much from economic growth and reforms as the east coast, and the gap in economic and social development is widening.
The project is supported by a technical assistance grant of US$150,000 to ensure mitigation measures for endangered species in an environmentally sensitive part of the Yangtze River where the 1.8km Yichang bridge is located.
The total cost of the project is US$2.36bn, of which the government (MOR) will finance almost half the cost (US$1.14bn) and the China Development Bank will provide a loan of US$725mn equivalent.
The ADB’s loan covers 21% of the project cost and comes from its ordinary capital resources, with a 26-year term, including a grace period of six years. Interest is determined in accordance with the ADB’s Libor-based lending facility.
MOR is the executing agency for the project, which is due for completion at the end of 2009.