BEIJING - The railway sector is high on China's government agenda with detailed measures on its reforms and instructions from Chinese Premier Li Keqiang.

China's State Council published a plan earlier this week to innovate railway funding and speed up construction. Experts said this was "appropriate" in the backdrop of economic structuring as railway development meets high transportation demands, narrows the regional economic gap, and helps social capital grow. EFFICIENT INVESTMENT

Railway constructions are expected to spur growth in the world's second largest economy, which has slowed for two consecutive quarters, said Xu Guangjian, a professor with the School of Public Administration at the Renmin University of China.

Efficient investment is what the country is after as it is plagued by excess production capacity in a number of sectors.

The railway sector, in the eyes of experts, is one answer to it.

Figures from the Beijing-Shanghai high-speed line showed that the number of passengers grew nearly 40 percent in its second year of operation ending on June 30, 2013, compared with the first year, according to Beijing-Shanghai High-Speed Railway Co., Ltd.

Traffic on the Beijing-Tianjin high-speed lines has grown at an annual rate of 20 percent since it opened in 2008. On busy days, trains run at five-minute intervals, figures from the former Ministry of Railways showed. The ministry was separated in March into administrative and commercial arms.

Chinese travellers have found that during the summer and winter vacations, and national holidays, high-speed trains are always packed.

High-speed lines, which were criticized for a waste of investment, now transport a quarter of the country's total rail passengers, ministry figures showed.

The country's freight lines are even busier, and have long been a drag on the Chinese economy, according to Wang Mengshu, a railway expert and an academician at the Chinese Academy of Engineering.

"The country's freight system has failed to meet the transportation demands for many years," he said.

"Railway transportation burns coal, while road transportation consumes petrol," said Wang. "More freight lines are needed."

Sun Zhang, a railway transport expert at the Tongji University, said railway development will surely reduce logistics costs.

Figures from the China Federation of Logistics and Purchasing showed that the country's logistics costs totalled 9.4 trillion yuan (1.5 trillion U.S. dollars) in 2012, accounting for 18 percent of China's GDP.

The level is high and needs to be brought down, said Sun. NARROWING DEVELOPMENT GAP

Chinese Premier Li Keqiang visited a railway construction site in northwest China's Gansu Province last Sunday.

It is part of the Lanzhou-Chongqing railway line that runs through mountainous areas where millions of villagers live and have long expected railway lines to extend to their homes.

During the inspection tour, Li said China will prioritize railway development in western regions, particularly the poor areas, to open up the gate that could lead to wealth for local people.

With increasing railway links, Li said China will encourage more labor-intensive and environmentally-friendly industries to move to the west, creating jobs for people living in nearby areas.

Railway expert Sun Zhang said as transportation improves in the central and western regions, their economies will enter a new phase of development.

GROWING SOCIAL CAPITAL

According to the State Council plan, China will open the ownership and management rights of intercity, suburban and branch railways as well as railways for resources transportation to social capital.

Besides, a railway development fund will be established, inviting social capital participation. Under the mechanism, social investors will not directly take part in the construction and management of railway projects, but the fund will guarantee stable and reasonable returns for investors.

Professor Xu Guangjian said the reform measures provide a platform linking social capital with railway development.

The Chinese government has been making efforts to break up monopolies and gradually open its financial, energy, railways and other sectors to social capital, as it seeks new momentum for development and ensures that the benefits of reforms will reach the entire population.