The money will pay for the double-line and upgrading of the railway corridor between Baoji, Shaanxi Province, and Lanzhou, capital of Gansu Province.

It will also support the reform programme of China's Ministry of Railways, according to a WB news release.

The project will help the Ministry of Railways pursue key institutional reforms and develop analytical tools to help set the stage for deepening the reform process.

The loan, granted on Tuesday, has a grace period of five years and a maturity of 20 years.

World Bank officials said the project will help improve access to rail services, stimulate economic growth and reduce poverty in Northwest China.

"Enhanced accessibility for passengers in this region - one of the country's poorest - will yield two benefits: increased railway capacity in the corridor and a reduction in travel time for both passengers and freight," said Richard Scurfield, World Bank task manager for the project. Rail service is critical because China is so large. Fifty-six per cent of freight transport and 37 per cent of passenger transport in the country move by rail.

Despite major capacity expansion and changes in market structure, China's railways need to continue to expand so as to meet the demands of a decentralized economy.

Furthermore, access to rails in the inner provinces is relatively sparse and needs to be improved if the government wants to achieve its goal of reducing regional disparities.

Capacity alone will not address these problems, however. Accelerating reform of railway operations is urgently required to help China's railways provide customer-orientated service, the bank said.

(China Daily February 01, 2002)