With so much of China's economy literally riding on its train tracks, the fall of Minister of Railways Liu Zhijun could delay projects, hurt rail companies and stir worries about graft besetting China's torrent of government-run spending.
Sheng Guangzu, the chief of China's customs authority, was sent to oversee the ministry after Liu came under investigation for "serious disciplinary violations".
The government has not said what Liu, 58, is accused of, and he has not been formally dismissed as minister or charged. But "disciplinary violations" usually means corruption and abuses of power that can lead to criminal charges.
Sheng urged rail officials to keep up the pace of projects and not to meddle with tenders from companies seeking a slice of Beijing's planned investment of between 3.6 trillion and 4 trillion yuan ($540-607 billion) in railways from 2011 to 2015.
"Ensure the progress of projects," Sheng said in a speech to officials on Sunday, the official People's Railway Daily said. He did not mention Liu's case.
"In railway project tenders, purchases of materials and equipment, we must absolutely avoid sending notes, making approaches, and applying influence," he said, apparently referring to underhand ways of influencing tender bids.
Despite Shang's vows, the scandal could slow rail projects, said Yankun Hou, an analyst with Nomura International.
"The best case is that the dismissal of Liu is purely an anti-corruption case, and the new minister will not change the railway development strategy," he said.
"The worst case, in our view, is that the new minister might review previous strategy and might significantly slow down the railway construction plan."
Liu has championed high-speed rail expansion.
Hong Kong-listed China South Locomotive and Rolling Stock Corp Ltd (CSR) fell by about 4.7 percent on Monday, while in Shanghai, China North Locomotive and Rolling Stock Corp Ltd lost 5.8 percent in early trading before recovering most of its losses.
Railways Ministry Under Scrutiny
China's ruling Communist Party often says it is committed to fighting corruption. But the country's heady brew of rapid growth and top-down political power creates plenty of temptation for officials to enrich themselves and their families.
Liu, railways minister since 2003, is the most senior official to fall under a corruption cloud since Chen Liangyu, the former Party chief of Shanghai, who was jailed in 2008.
The scandal may renew momentum to reform or even abolish the Ministry of Railways, which unlike many other Chinese ministries has resisted hiving off its spending operations into separate corporations, said Mao Shoulong, a professor of public policy at Renmin University in Beijing.
In 2007 and 2008, the ministry stymied proposals to merge it with the Ministry of Transport.
China's succession politics may spur more anti-corruption cases as President Hu Jintao and Premier Wen Jiabao prepare to retire from late 2012 and potential heirs vie to stamp their authority, said Mao. (Reuters)
"Liu Zhijun was a powerful opponent of proposals to restructure the rail sector, and that damaged the standing of the new leadership," he said.
Vice Premier Li Keqiang, likely to succeed Wen as premier, oversaw those ministerial reform proposals.
"Liu Zhijun used his influence to oppose those reforms, and now he's gone, the voices opposing them will be seriously weakened," said Mao.
