JAKARTA (AFP) - Chinese and Indonesian state-owned companies on Friday (Oct 16) signed a US$5.5 billion (S$7.6 billion) deal to build the first high-speed railway in South-east Asia's top economy, after Beijing beat Tokyo to win the construction project.

The line will connect the Indonesian capital, Jakarta, with the mountain-fringed city of Bandung, some 160km away, and is a key part of President Joko Widodo's plans to overhaul the archipelago's infrastructure and attract investors.

Japan was long expected to build the railway, but China entered the contest earlier this year, and Tokyo's bid was rejected last month after a chaotic bidding process that infuriated the Japanese.

On Friday, the chairman of state-owned China Railway International, Yang Zhongmin, signed a deal with a consortium of Indonesian state companies to form a joint venture to build the railway, with construction set to start next year and the line to begin operating in 2019.

"This high-speed train will make it easier for the public to travel," he told reporters in Jakarta, where the deal was inked. "This major project will also provide major employment opportunities and boost the economy."

State-owned China Development Bank will provide 75 per cent of the funding, with the rest coming from the Chinese railway company and Indonesian consortium.

The railway line will not need any financing from the Indonesian government, nor a government guarantee. One reason that Indonesian officials gave for rejecting the Japanese bid was that it would require government funding.

The high-speed train route will cover eight stations from Jakarta to Bandung, and the train will travel at around 250km an hour.

The Indonesian government repeatedly changed its mind about the railway project, before eventually agreeing to accept China's bid for a high-speed line.

The chaotic bidding process and final decision angered Tokyo, which is increasingly competing with Beijing for influence in Asia, with chief government spokesman Yoshihide Suga slamming it as "extremely regrettable".

Japan's loss came despite its reputation as a world-class train maker, famed for its "shinkansen" bullet trains.

China has built thousands of kilometres of high-speed railway in recent years, but its safety standards have come under scrutiny - a 2011 crash killed at least 40 people and injured about 200.