The Chinese government has approved the establishment of the China Railway Corporation to perform the business functions of the defunct Ministry of Railways (MOR) as part of the country's cabinet restructuring plan.

The planned corporation, with a registered capital of 1.04 trillion yuan (US$165.73 billion), will be a wholly state-owned enterprise administered by the central government and supervised by the Ministry of Transport and the future State Railways Administration (SRA), according to a statement posted on the government website on Thursday.

The Ministry of Finance will represent the State Council in performing the functions of investors, according to the statement.

The specific date for the establishment was not unveiled in the statement.

The approval came after the 12th National People's Congress adopted a cabinet restructuring plan at a plenary meeting on Thursday, with the proposals including dismantling the MOR into administrative and business arms in a bid to reduce bureaucracy and improve efficiency.

People take photos in front of the gate of the Ministry of Railways on March 11, 2013 as China plans to split it up into administrative and commercial branches in order to reduce bureaucracy and improve railway service efficiency.[Photo/CFP]

While the SRA will perform the administrative functions, the China Railway Corporation will execute business operations which are currently controlled by the MOR.

The related assets, liabilities and personnel of the previous MOR will be transferred to the corporation, while the interests and rights of 18 local railway administrative bureaus, three transport companies and the remaining companies will belong to the corporation.

The statement noted the corporation could continue to enjoy favorable tax policies, while its bonds on railway construction will be supported by the government.

According to the statement, the central government will allow the corporation not to turn over gains made from state-owned assets before the debts of the former MOR are properly handled.

The ministry's debt-to-asset ratio climbed to 61.81 percent at the end of September 2012. Its total assets were 4.3 trillion yuan and its debts amounted to 2.66 trillion yuan at that time, official data showed.

The hefty debts came along with the country's railway construction boom in recent years and have aroused public concerns.

In response to these doubts, Railways Minister Sheng Guangzu promised to properly solve the debts owed by the MOR, for business purposes and for public welfare as well, while hoping private capital and foreign funds could actively participate in the new company's projects.

Like the MOR, the company will shoulder transportation for the purposes of public welfare, as the government pledged to subsidize businesses of this kind and to some extent cover the company's losses from public service railways.

The country's banks will continue to extend financial support to railway investment and will work out more comprehensive measures to support railway construction and investment, Liu Shiyu, deputy governor of the People's Bank of China, said at a press conference on the sidelines of parliament's annual session.

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.