[photopress:logistics_beijing_shanghai_railway_1_2.jpg,full,alignright]Ping An Insurance, China’s second biggest insurer, will pay $2.3 billion for a 14% stake in the Beijing-Shanghai High-Speed Railway.
Ping An has raised billions of dollars recently to pay for such acquisitions.
In remarks posted on the central government’s Web site, Cai Qinghua, who is also vice minister of the Railway Ministry, said the National Council for the Social Security Fund would also buy a stake in the railway, investing RMB10 billion ($1.4 billion) for an 8.7% interest.
Construction of the railway has already begun in Beijing. This is one of these solid investments which China throws up where the scale of investment is so large that only the very, very big players and the government can afford to ante up.
We are looking at $2.7 billion for 24.7%. Using back-of-envelope economics that has to be about $10.4 billion all up and so a return of something closer to a billion dollars a year, rather than half a billion is expected.
That is very serious investment but you can see that a high speed run between Bejing and Shanghai is a natural.
Instead of the misery and expense and time of hacking it to the airport you get on the train ten minutes before it is due to leave, work on your laptop and before you know it you are at the center of your destination city. Which means it is as near as guaranteed investment as exists.
Source: Businessweek