By Li Hongmei 

China will allow private capital to operate and own intercity and intra-city railway lines, and also plans a rail fund that encourages private investment, in a bold move to tap the market for funding.

The government is accelerating rail reforms by introducing multi-financing channels for railway construction, according to a statement posted on the central government's website yesterday.

Government investment and the railway system's financing have long been the primary sources of capital for railway construction. But these limited channels have become increasingly unable to meet the rising demand for capital, according to the State Council, China's Cabinet.

The statement also said: "Priority will be given to railway construction in central and western China as well as the poor needy areas."

State-owned railway giant China Railway Corp has announced plans to raise fixed-asset investment to 660 billion yuan (US$108 billion) this year. The CRC will receive subsidies over three years from 2013 for railway construction to address problems like insufficient funds, the Cabinet said, without disclosing more details.

Government-backed railway construction bonds will continue to be issued in the next three years, according to the Cabinet.

Also on track is a Railway Development Fund open to private capital which is not involved in rail construction, the statement said without elaborating.

"But steady returns from railway operations should be guaranteed," the statement added.

About 5,500 kilometers of railway lines will become operational, bringing the total length in operation to 100,000km by the end of this year.