A 62-kilometers State-owned railway in Guangdong will be sold off soon, possibly becoming the first railway in China to be completely owned by private investors.

The State-owned Luoding Railway Co., an unprofitable coal carrier servicing two undeveloped cities in the province, has been announced for auction at the Web site of Guangzhou Enterprises Mergers & Acquisitions Services last week.

An official with Guangzhou Enterprises Mergers & Acquisitions Services said Sunday that it's the first time for the agency to deal with an auction on a railway company's total assets.

"The local government has agreed to auction the Chunluo railway connecting Yangchun and Luoding, so as to raise money for building another railway," said Fu Dunan, general manager of the government-invested Luoding Yongsheng Assets Management Company, owner of the Luoding Railway Co.

According to Fu, Luoding Railway Co. has been burdened with a total debt of 793.66 million yuan (US$99.2 million) by the end of last year.

"The main reason for the huge debts is the lack of freight transport on the Chunluo railway which failed to link with the national railway grid, " Fu said.

A new railway has been planned in the area to extend the Chunluo railway to Cenxi in the neighboring Guangxi Zhuang Autonomous Region, which will be a key railway linking Guangdong and Guangxi in the coming years, and will help boost the economy of Luoding City.

Fu said the 75.71-kilometer Luoding-Cenxi Railway, with 33 kilometers within Luoding City, will need a total investment of 1.47 billion yuan. This will be an impossible expense for the Luoding government, whose financial income was less than 200 million yuan in 2005.

According to the auction announcement, the buyers of the Luoding Railway Co. must have registered assets of 300 million yuan in 2005, the total assets of no less than 7 billion yuan, debt to asset ratio lower than 50 percent, and annual turnover no less than 2 billion yuan.

The buyers will not only take over all debts of Luoding Railway Co. but also undertake the construction of Luoding-Cenxi railway, said the announcement.

Chen Huiyong, vice general manager of Luoding Railway Co., said the company has asked the Ministry of Railways whether the railway can be sold to foreign investors, but the ministry has not yet responded. "There is still the possibility," said Chen.

China has opened up some of its monopolized industries to private investors in recent years, such as power, railway, aviation, telecommunications and petroleum.

Starting in the late 1990s, China's private investors were allowed to enter the railway freight sector, then expand to passenger transportation on some railways.

April 2005 was the first time a railway was built with a portion of private investment.

A document released by the Ministry of Railways last year said the ministry will encourage all kinds of private investment in the country's national railroads, branch railroads and local railroads.

Editor: Yan