Yi Gang, vice governor of China's central bank  [File Photo]

Vice governor of China's central bank Yi Gang said Sunday the debts owed by the Ministry of Railways (MOR) must be properly handled to stabilize expectations of the lenders, the market and the public.

Yi's remarks on the sidelines of the national legislature's annual session came after the State Council, or China's cabinet, announced Sunday a plan to dismantle the MOR into administrative and commercial arms.

The proposed State Railways Administration will be under the supervision of the Ministry of Transport and perform administrative functions of the defunct MOR, while the planned China railway corporation will run commercial businesses which are controlled by the MOR.

"Although the MOR is scheduled to be broke up, construction of rail lines will continue," Yi said, "thus it's very important to resolve the subsequent financing issue."

"A proper handling of the debt issue is good for stabilizing market expectations and carrying on railway construction," he said, adding that a number of national and regional banks, big or small, have been involved in the construction of railways for years.

According to the MOR, China had 98,000 km of rail lines, including 9,356 km of high-speed rail lines, in operation at the end of 2012. The MOR financial statements showed the total MOR assets stood at 4.3 trillion yuan (US$685.6 billion) as of September 2012, while the total liabilities stood at 2.66 trillion yuan, with a debt-to-asset ratio of 61.8 percent.

"The bonds and other debts of the MOR must be dealt with clearly," Yi said.

According to the restructuring plan, the new State Railways Administration will be responsible for setting railway technology standards and supervising railway work safety, transport service quality and railway project quality, while the China railway corporation will be responsible for railway transportation dispatch and command, freight and passenger transport business management and railway construction.

Minister of Railways Sheng Guangzu promised Sunday to properly solve the debts owed by the MOR, for business purposes and for public welfare as well.

"The employees will not be laid off because of the breakup," Sheng said, trying to reassure the ministry's 2.4 million employees.

Sheng hoped private capital and foreign funds could actively participate in incorporation of the new company.

The breakup plan also triggered public concerns that train fares will rise soon, as Sheng said the average train fare is "relatively low."

Sheng said the future pricing of train tickets should be decided by the market law.

"We will work to ensure that people can get train tickets more easily," he said.

The MOR recorded a combined revenue of 975.2 billion yuan last year, up 15 percent from a year earlier, MOR data showed.

The State Council's breakup plan for the MOR is subject to the vote of the first session of the 12th National People's Congress.