Ping An, in which HSBC Holdings (0005) holds 19.9 percent, plans to invest in building a railway between Guangzhou and Wuhan in central China, making it the first insurer allowed to invest in a railroad.

Ping An Trust, an investment arm of Ping An Insurance, will raise at least 8 billion yuan for the railway through a trust investment product targeting institutions, the sources said.

Product roadshows began this week in Guangzhou and Wuhan. The company has declined to comment.

The Wuhan-Guangzhou railway is expected to open in 2010 and the government has estimated total investment at 100 billion yuan, state media said last year when building began.

"Ping An will work with the Ministry of Railways on the project. The government will invest about 50 billion yuan in the railway and leave the other half to institutional investors such as asset management companies or insurance firms," said one source.

Earlier this year four mainland insurers, including Ping An and bigger rival China Life Insurance (2628), were given credentials to invest in infrastructure projects, as part of Beijing's efforts to broaden their investment options.

The Wuhan-Guangzhou project will be one of China's first dedicated passenger rail lines, allowing passenger trains to move faster and clearing space for cargo on older lines.

"Actually, this is just a beginning for Ping An as they have also been in talks with the government on another project - the reconstruction of the existing Beijing-Shanghai railway route," said a second source.

"China Life is also in the bidding for part of the investment in the Beijing- Shanghai project, and hopefully the government will allow the two insurance giants to jointly sponsor the project."

Sources said the asset management arm of China Life had approached the railways ministry late last year about taking part in the Wuhan-Guangzhou project.

The sources said they did not know if this was still a possibility.

"It's quite clear that insurance companies are desperate to spend money on investments for high returns as their premiums are soaring every year.

"And the government, especially the railways ministry, which is always fighting for its budget with the finance ministry, is short of a lot of money," a source said.

REUTERS