A private company's acquisition of the State-owned Luoding Railway Corp will allow for the construction of the Luoding-Cenxi railway to resume, giving a much-needed boost to the economy of western Guangdong Province.

Shenzhen-based Zhongji Industrial Corp, in which the State has only a minor share, signed an agreement on Monday with Luoding Yongsheng Assets Management Corp to acquire Luoding Railway Corp for 41.86 million yuan (US$5.16 million).

The agreement was signed on the condition that the Shenzhen firm would take over all of Luoding's debts worth 846 million yuan (US$104.32 million), and would secure an 84-per-cent stake in a 62-kilometre stretch of railway from Chunwan to Luoding.

In an interview yesterday, Zhongji President Cheng Qingbo said that the acquisition will benefit both his company and Luoding.

"For Zhongji, as well as winning the massive project to extend the railway to Cenxi in Southwest China's Guangxi Zhuang Autonomous Region, the deal will enable our firm to profit from transportation and other logistics services," he said.

"And for Luoding Railway Corp, the deal will rid it of its huge debts and make the construction of the railway extension project a possibility."

Citing the outcome of a study by a design institute of the Ministry of Railways, he said that Zhongji would be able to achieve a return on its investment in about 11 years.

And the company will benefit from growing business opportunities when the extension project is completed in three years' time.

The Chunwan-Luoding railway opened in 2000. Ever since, the railway has been suffering from the inadequate levels of freight transport.

Construction of the Luoding-Cenxi line will require a total investment of 1.5 billion yuan (US$184.96 million), 65 per cent of which will come from bank loans, he said.

Liang Renqiu, an official from the Luoding municipal government, said that Zhongji's involvement in the local railway projects would help boost local economic development when the railway extension is linked with the national network.

As a result, construction of the second-phase project of the Yuelong Power Plant will be made possible, the official said, and the transportation of local minerals including manganese, iron ore, stones and coal will no longer suffer from bottlenecks.

Liang said that the local fiscal revenue is expected to grow by 30 per cent when the railway line becomes operational.

Editor: Yan