Jan 06, 2012 03:53 PM

City Subway Construction Decelerates in China


The signed contract in hand should have imbued the urban rail equipment manufacturer's executive with confidence.

Instead, the formal Shanghai Shentong Metro Group contract was a cause for disappointment: The document was worth no more than the paper itself.

Soon after awarding the contract in December, the city subway operator indefinitely delayed the equipment purchase and shelved plans to expand the underground's rolling stock by seven trains in 2012.

"The subway project has been completely postponed," the executive told Caixin, clutching the contract that won't be fulfilled. "For now, we have no new orders, and old orders are being deferred. This has affected us greatly."

It was not an isolated letdown. A golden but brief era for urban railway suppliers, builders and related companies across China appears to have ended in recent months.

Local governments nationwide have slashed infrastructure spending since last summer, and the urban rail business has slowed to a crawl after several years of rapid growth. Spending for subways was cut as central government economic planners put the brakes on rail projects and indirectly reduced local government spending power by maintaining real estate market controls designed to prevent housing price inflation.

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