SHANGHAI (AP) China’s rail and road building boom is running short of cash, according to reports saying some projects have been suspended as workers and suppliers go unpaid.

Many of the 6 million migrant workers employed in China’s massive railway buildup have not been paid for months, with some 6,200 mi. (10,000 km) of projects halted due to a lack of money, reports said Oct. 19.

Contractors also owe huge sums to cement and steel suppliers, the China Daily newspaper reported, citing Wang Mengshu, a member of the Chinese Academy of Engineering.

The Railway Ministry did not respond immediately to phone calls requesting comment.

It has been a tough year for the ministry, whose longtime chief, Liu Zhijun, was dismissed in February amid a corruption probe.

A collision of two high-speed trains in late July, which killed 40 people and injured 177, prompted a review of many railways projects and suspension of some. In September, spending on railway construction fell 19 percent from a year earlier, reflecting the slower pace following the accident.

But the showcase railways construction program was already struggling with surging debt and difficulties in securing financing as state banks have tightened lending in order to meet record high reserve requirements imposed by the central bank to fight inflation.

The financial magazine Caijing recently reported that highway construction projects also are facing heavy pressure to repay loans that they normally would expect to roll over.

China has relied heavily on massive stimulus spending, mostly on construction, to help fend off the impact of the financial crisis. The country is due to spend roughly $440 billion on railway construction in 2011-2015.

A slowdown could have repercussions for major construction-related industries such as steelmaking, cement and equipment manufacturing.

While much of the construction of both railways and highways is seen as vital for relieving transport bottlenecks, analysts say many projects may not recoup their costs in the foreseeable future.

“In the past few years, railway construction has expanded too quickly and on too big a scale. Some lines being built are parallel and short-distance lines,” said Li Hongchang, a professor of economics and management at Beijing Jiaotong University.

Though it issues corporate bonds, the Railways Ministry holds a virtual monopoly on rail transport in China, operating its own courts and police force. Its trains have been upgraded with the push toward high-speed rail, but ticketing and other services in its stations have lagged behind.

“If efficiency is low there will be a gap between revenues and costs, and the only one who can help the situation is the government,” he said.

The ministry held $315 billion in debt as of the end of June and is due to issue about $16 billion in bonds this year to help fund construction.

To entice wary investors, the government recently cut the tax on interest from railway bonds. It also has designated them as government-backed bonds, rather than corporate bonds.

Perhaps to reassure any investors who remained wary, the National Development and Reform Commission, China’s main planning agency, issued a statement on the bond clearing house website guaranteeing government backing for the ministry’s bonds.

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