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Probe of minister could slow China's railway growth

| Tuesday, Feb. 15, 2011

BEIJING -- China's plans for a vast railway expansion could slow since the minister in charge has come under disciplinary investigation and the official sent to sort out his ministry warned against corruption in project bids.

With so much of China's economy literally riding on its train tracks, the fall of Minister of Railways Liu Zhijun could delay projects, hurt rail companies and stir worries about graft besetting China's torrent of government-run spending.

Sheng Guangzu, the chief of China's customs authority, was sent to oversee the ministry after Liu came under investigation for "serious disciplinary violations."

The government has not said what Liu, 58, is accused of, and he has not been formally charged or dismissed as minister. But "disciplinary violations" usually means corruption and abuses of power that can lead to criminal charges.

Sheng urged rail officials to keep up the pace of projects and not to meddle with tenders from companies seeking a slice of Beijing's planned investment of $540 billion to $607 billion in railways from 2011 to 2015.

The scandal could slow rail projects, said Yankun Hou, an analyst with Nomura International.

"The best case is that the dismissal of Liu is purely an anti-corruption case, and the new minister will not change the railway development strategy," he said.

"The worst case, in our view, is that the new minister might review previous strategy and might significantly slow down the railway construction plan."

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