BEIJING - CHINA has approved a massive 2 trillion yuan (S$440 billion) for the construction of railways to help boost economic growth amid the worldwide financial crisis, state media said on Saturday.

The measure comes after China said gross domestic product growth slowed sharply in the third quarter to 9 per cent, from 10.1 per cent in the second quarter.

Much of 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 very overcrowded, especially at holiday periods.

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

'Increasing investment in fixed assets has remained a catalyst of China's economic development,' the China Daily said.

'In 1997, we dealt with the Asian financial crisis by stimulating domestic economic growth by investing in the construction of highways,' the China Daily quoted Mr Zheng Xinli, a senior government policy adviser, as saying.

'This time, the money will go on improving the rail network.'

The newspaper did not give a timeframe for the investment, but Beijing budgeted 1.2 trillion yuan in rail investment for 2006-2010, more than four times the sum in the previous five years, to make up for past underinvestment that has resulted in serious cargo and passenger bottlenecks. -- REUTERS