Beijing - China will invest 2 trillion yuan (S$440 billion) in its overburdened rail system as a stimulus measure aimed at blunting the impact of the global financial crisis, state press said yesterday.

The measure - reminiscent of similar moves taken by Beijing during the 1997 Asian financial crisis - comes after the Chinese economy recorded its slowest growth in five years.

The investment is part of plans to extend the country's railway network from the current 125,528km to nearly 160,935km by 2010, Shanghai's Oriental Morning Post reported.

While the network needs extending, the massive investment is also intended to help lift the nation's economy as it suffers amid the global financial woes, a rail official was quoted as saying by the Beijing News.

'New rail investment will become a shining light in efforts to push forward economic growth,' railway ministry spokesman Wang Yongping was quoted as saying.

China's gross domestic product growth slowed sharply in the third quarter to 9 per cent, from 10.1 per cent in the second quarter.

The situation has looked increasingly dire in recent days with export-dependent factories closing and laying off thousands of workers, and warnings from industry heads of much worse to come.

The government's main website, www.gov.cn, said last week that China would ramp up infrastructure spending, most likely on roads, airports, nuclear power plants and hydropower stations.

The Chinese authorities have also announced that they would give some relief to exporters by raising tax rebates for a quarter of their products from next month, targeting sectors worst hit by the slowdown such as textiles and toys.

The China Daily newspaper said the rail investment plan had been approved by the State Council.

About 1.2 trillion yuan has already been allocated, it added.

The paper quoted a government policy adviser as saying the plan was similar to China's successful strategy for warding off the Asian financial crisis of the late 1990s.

'In 1997, we dealt with the Asian financial crisis by stimulating domestic economic growth through investment in the construction of highways,' policy adviser Zheng Xinli was quoted as saying. 'This time, the money will go to improving the rail network.'

China's railway network is one of the most extensive in the world, but has come under pressure as the nation's economy has boomed.

Past underinvestment has also resulted in serious cargo and passenger bottlenecks.

Much of the current rail capacity is devoted to the transport of coal, the main source of power, forcing a lot of freight to be moved by road even though it is less efficient.

Passenger trains are also overcrowded, especially during holiday periods.

The vulnerability of the rail network was laid bare last winter, when fierce snowstorms crippled China's transport systems, stranding millions of passengers trying to return to their homes during the peak Chinese New Year travel period.