Significant increases in electricity prices could harm our business.

Significant increases in the cost of electricity could increase the costs of our passenger and freight transportation. The electricity we use, including electricity used for our lines, is supplied through various entities under the jurisdiction of the Guangdong provincial power bureau on normal commercial terms. Any increase in the cost of electricity in Guangdong could increase our railway operating expenses. In 2011, 20122013, 2014 and 2013,2015, we paid approximately RMB611.1RMB675.2 million, RMB660.7RMB585.8 million and RMB675.2RMB599.3 million respectively, in electricity charges. Accordingly, significant increases in electricity prices could have a material adverse effect on our financial condition and results of operations.

Our railroads connect with the railroads of other operators and any disruption in the operation of those railroads, or our cooperation with other operators, could have a material adverse effect on our business and operations.

Our railroads are an integral part of the PRC national railway network. Our railroads connect with theBeijing-Guangzhou line in the north, theShenzhen-Kowloon rail line in the south, theGuangzhou-Maoming rail line in the west, and theGuangzhou-Meizhou-Shantou rail line in the east, all of which are owned and operated by other operators. See “ITEM 4. INFORMATION ON THE COMPANY—A. History and Development of the Company—Service Territory” for additional information. Our train services use these other railroads to carry passengers and freight to locations outside of our service territory. The performance of our domestic long distance trains services and our Hong Kong Through Trains depends on the smooth operation of these railroads and our cooperation with the operators of these railroads. Any disruption in the operation of these railroads, or our cooperation with any one of these railroad operators for any reason, could have a material adverse effect on our business and results of operations.

Any changes in our right to own and operate our business and assets, our right to profit and our right of asset disposal as previously granted by the MOR and the State Council may have a material adverse effect on our business and results of operations.

We have been granted certain rights by the MOR and the State Council, with respect to certain aspects of our railroad and related businesses and operations, and also received legal clarification and confirmation of our asset ownership, corporate powers and relationships with service providers and other entities in the national railway system, in connection with our Restructuring. These rights include the right to own and operate our business and assets, the right to profit and the right of asset disposal. Although these rights were granted to us indefinitely, we cannot assure you that these rights will not be affected by future changes in PRC governmental policies or regulations or that other railway operators will not be granted similar rights within our service region. For example, since the MOT and National Railway Administration will be assuming the administrative duties formerly performed by the MOR, there may be changes in the regulatory landscape for such rights. If another railway operator is granted similar rights within our service region, the level of competition we face will increase significantly.

Guangzhou Railway (Group) Company, as our largest shareholder and one of our major service providers, may have interests that conflict with the best interests of our other shareholders and our Company.

Before our A Share Offering, in December 2006, Guangzhou Railway (Group) Company, or GRGC held 67% of our issued share capital and was our controlling shareholder. Although the equity interest held by GRGC in our Company decreased to approximately 41% after the completion of the A Share Offering and further to approximately 37.1% as a result of the transfer by GRGC of a portion of its equity interest in our Company to the National Social Security Fund Council in September 2009, GRGC can still exercise substantial influence over our Company. GRGC’s ownership percentage enables it to exercise substantial influence over (i) our policies, management and affairs; (ii) our determinations on the timing and amount of dividend payments and our adoption of amendments to certain of the provisions of our Articles of Association and (iii) the outcome of most corporate actions. Subject to the requirements of applicable laws and regulations in China and the HKSE Listing Rules, GRGC may also cause us to effect certain corporate transactions.

GRGC’s interests may sometimes conflict with the interests of the other shareholders. We cannot assure you that GRGC, as our single largest shareholder, will always vote its shares in a way that benefits the other shareholders of our Company. In addition to its relationship with us as our single largest shareholder, GRGC, by itself or through its affiliates, such as Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company, a wholly owned subsidiary of GRGC, and Guangmeishan Railway Co., Ltd., also provides us with certain services, for which we have limited alternative sources of supply. The interests of GRGC and its affiliates as providers of these services may also conflict with our interests. We have entered into service agreements, and our transactions with GRGC and its affiliates have been conducted on open, fair and competitive commercial terms. However, we only have limited leverage in negotiating with GRGC and its affiliates over the specific terms of the agreements for the provision of these services as there are no alternate suppliers. See “ITEM 4. INFORMATION ON THE COMPANY—B. Business Overview—Major Suppliers and Service Providers” and “ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS—B. Related Party Transactions” for additional information regarding the services provided to us by GRGC and its subsidiaries.

We have very limited insurance coveragecoverage..

We do not maintain any insurance coverage against third party liabilities, except compulsory automobile liability insurance. In addition, we do not maintain any insurance coverage for most of our property, for business interruption or for environmental damage arising from accidents that occur in the course of our operations. As a result, we have to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our results of operations and financial condition.

We could incur significant costs for violations of applicable environmental laws and regulationsregulations..

Our railroad operations and real estate ownership are subject to extensive national and local environmental laws and regulations concerning, among other things, gaseous emissions, wastewater discharge, disposal of solid waste and noise control. In addition, environmental liabilities may arise from claims asserted by adjacent landowners or other third parties. As of December 31, 2013,2015, we had not incurred any such liabilities and therefore, had not made any provision for such liabilities. We may also be required to incur significant expenses to remediate any violation of applicable environmental laws and regulations. In 2013,2015, our environmentalprotection-related expenses were approximately RMB5.7RMB52.8 million, mainly related to theconstruction of fixed suction sewage facilities in railway stations and environmental improvement and reconstruction of the sewage treatment equipment of Jishan sewage treatment plant.Shaoguan Training Base.

Technological problems attributable to accidents, human error, severe weather or natural disasters could affect the performance or perception of our railway and result in decreases in customers and revenue, unexpected expenses and loss of market share.

Our operations may be affected from time to time by equipment failures, delays, collisions and derailments attributable to accidents, human error or natural disasters, such as typhoons or floods.

As ourhigh-speed train service becomes technologically more complex, it may become more difficult for us to upkeep and repair our equipment and facilities as well as to maintain our service and safety standards. Furthermore, as we heavily rely on third parties for technical upgrades and support with regard to certain equipment and facilities, in case of any problems arising during our operation, our own staff may lack the technical expertise to identify and fix the problems in time. Moreover, the newly upgraded equipment may not be fully compatible with our existing operation system and may not meet our safety, security or other standards. The use of such equipment and facilities could result in malfunctions or defects in our services. In addition to potential technical complications, natural disasters could interrupt our rail services, thus leading to decreased revenue, increased maintenance and higher engineering costs.

If we experience any equipment failures, delays, temporary cancellations of schedules, collisions and derailments, or any deterioration in the performance or quality of any of our services, it could result in personal injuries, damage of goods, customer claims of damages, customer refunds and loss of goodwill. These problems may lead to decreases in customers and revenue, damage to our reputation, unexpected expenses, loss of passengers and freight customers, incurrence of significant warranty and repair costs, diversion of our attention from our transportation service efforts or strained customer relations, any one of which could materially adversely affect our business. For example, in January and February 2008, certain regions in southern China experienced extraordinary harsh winter weather, which caused equipment failures and delays and cancellations of some of our scheduled trains. As a result, during such period of freezing weather, our cost for repair of equipment increased and our revenue decreased. We cannot assure you that such events will not happen again in the future. In addition, on July 23, 2011, twohigh-speed trains collided on the Yongtaiwen railway line in the suburbs of Wenzhou, Zhejiang Province, China. 40 people were killed and 172 people were injured in this accident (the “Wenzhou Railway Accident”). Although we believe we have maintained effective safety measures and there has been no such collision accidents on railway lines operated by us since our inception, we cannot assure you that similar accidents will not occur on our railway lines in the future. The occurrence of any such accident could have a material adverse impact on us.

The revenue or charges settled by the MOR for certainlong-distance passenger train and freight transportation businesses are finally determinedsettled by China Railway Corporation in accordance with the MOR.unified settlement rules.

As described in “ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS—B Related Party Transactions” and Notes 3736 and 3837 to our audited consolidated financial statements included elsewhere in this annual report, due to the fact that the railway business is centrally managed by the MORChina Railway Corporation (“CRC”) within the PRC, we work in cooperation with the MORCRC and other railway companies owned and controlled by the MORCRC for the operation of certainlong-distance passenger train and freight transportation businesses within the PRC. The revenue generated from theselong-distance passenger and freight transportation businesses is collected and settled by the MORCRC according to its settlement systems. The charges for the use of the rail lines and services provided by other railway companies are also settled by the MORCRC based on its systems. Although we can, to a certain extent, calculate the revenue and charges settled by the MORCRC based on our own data and information, the amount of settlement is finally determinedsettled by the MOR. We expect that the China Railway Corporation will assume the duties of the MOR and operate in the same way.CRC.

We may encounter difficulties in complying with theSarbanes-Oxley Act of 2002.

The United States Securities and Exchange Commission, as required by Section 404 of theSarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, an independent registered public accounting firm must report on the effectiveness of the company’s internal control over financial reporting. Although we have concluded that we maintained effective internal control over financial reporting for each of the years ended December 31, 2011, 20122013, 2014 and 2013,2015, we may not be able to conclude in future years that we have effective internal control over financial reporting, in accordance with theSarbanes-Oxley Act of 2002. See “ITEM 15. CONTROLS and PROCEDURES.”

Moreover, in future years, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree. If our independent registered public accounting firm is not satisfied with our internal control over financial reporting or the level at which our internal control over financial reporting is designed or operated, or if the independent registered public accounting firm interprets the requirements, rules or regulations differently than we do, then they may issue an adverse opinion. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our reporting processes, which could adversely impact the market price of our H shares and ADSs. In addition, we will continue to incur significant costs and use significant management and other resources in order to comply with Section 404 of theSarbanes-Oxley Act of 2002.

Risks Relating to Conducting Business in China

Substantially all of our assets are located in China and substantially all of our revenue is derived from our operations in China. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal developments in China.

China’s economic, political and social conditions, as well as government policies, could affect our business.

As we are established, and operate substantially all of our businesses, in China, any changes in the political, economic and social conditions of the PRC or any changes in PRC governmental policies or regulations, including a change in the PRC government’s economic or monetary policies or railway or other transportation regulations, may have a material adverse effect on our business and operations and our results of operations. The economic environment in the PRC differs significantly from the United States and many Western European countries in terms of its structure, stage of development, capital reinvestment, growth rate, level of government involvement, resource allocation,self-sufficiency, rate of inflation and balance of payments position. The PRC government’s economic reform policies since 1978 have resulted in a gradual reduction in state planning in the allocation of resources, pricing and management of assets, and a shift towards the utilization of market forces. The PRC government is expected to continue its reforms, and many of its economic and monetary policies still need to be developed and refined. In addition, certain changes in governmental policies from time to time may negatively affect our business and operations. For example, the cooling measures imposed by PRC government on the real estate industry since early 2011 in response to rising housing prices has resulted in our decreased transportation of construction materials, coal, iron ore, oil and steel that are largely used in that industry. On January 1, 2014, the PRC government also implemented a Pilot Scheme for the Change from Business Tax to Value-added Tax (the “Pilot Scheme”) in the railway transportation industry. Value-added tax is a tax on top of but separated from price. According to the relevant accounting standard in China and overseas, operating revenues should be recognized after deducting value-added tax. As our income and pricing scheme remained unchanged after the implementation of the Pilot Scheme, the deduction of value-added tax from our income received from the original pricing scheme resulted in our reduced operating revenues in 2014 as compared to the same period in 2013.We cannot assure you that future changes in governmental policies or regulation will not have a material adverse effect on our business, operations or results of operations.

Government control of currency conversion may adversely affect our operations and financial results.

Our books and records are maintained and our financial statements are prepared and presented in RMB, which is not a freely convertible currency. All foreign exchange transactions involving RMB must be transacted through banks and other institutions authorized by the People’s Bank of China, or PBOC. We receive substantially all of our revenue in RMB. We need to convert a portion of our revenue into other currencies to meet our foreign currency obligations, such as payment of cash dividends on our H shares and equipment purchases from overseas regions. In addition, the existing foreign exchange limitations under PRC law could affect our ability to obtain foreign currencies through debt financing, or to obtain foreign currencies for capital expenditures or for distribution of cash dividends on our H shares.

Fluctuation of the RMB could adversely affect our financial condition and results of operations.

The value of the RMB fluctuates and is subject to changes in market conditions as well as China’s political and economic conditions. Since 1994, the conversion of RMB into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’sinter-bank foreign exchange market rates and current exchange rates on the world financial markets. On July 21, 2005, the PRC government changed itsdecade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed floating band against a basket of certain foreign currencies. On April 14, 2012, the PRC government further allowed the floating band of RMB’s trading prices against the U.S. dollar to widen from 0.5% to 1% on each business day effective from April 2012, and further widened the floating band to 2% in March 2014. This has resulted in greater volatility in RMB exchange rate. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. We have certain U.S.dollar-denominated and HKdollar-denominated assets and the appreciation of RMB could result in a decrease of the value of these assets. For further information on our foreign exchange risks and certain exchange rates, see “ITEM 3. KEY INFORMATION—A. Selected Financial Data” and “ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK—Currency Risks.” We cannot assure you that any future movements in the exchange rate of RMB against the United States dollar or other foreign currencies will not adversely affect our results of operations and financial condition.

The differences with respect to the PRC legal system could limit the legal protections available to youyou..

As the PRC and the U.S. have different legal systems and the court decisions in China do not have binding force on subsequent cases, there are significant differences between the PRC legal system and the U.S. legal system. In addition, because the PRC Company Law is different in certain important aspects from company laws in Hong Kong, United States and other common law countries and regions and because the PRC laws and regulations dealing with business and economic matters, including PRC securities laws, are still evolving, you may not enjoy shareholder protections to which you may be entitled in Hong Kong, the United States or other jurisdictions.

TheAn independent registered public accounting firm which has a substantial role in the audit report includedof our company, like other independent registered public accounting firms operating in this annual report is prepared by an auditor whoChina, is not inspectedpermitted to be subject to inspection by the Public Company Accounting Oversight Board, and as such, youinvestors may be deprived of the benefits of such inspection.

Auditors of companies thatwhose shares are registered with the SECU.S. Securities and Exchange Commission and traded publicly in the United States, including ouran independent registered public accounting firm which has a substantial role in the audit of our company, must be registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because we havestandards applicable to auditors. The independent registered public accounting firm which has a substantial operations withinrole in the audit of our company is located in, and organized under the laws of, the PRC, andwhich is a jurisdiction where the PCAOB, notwithstanding the requirements of U.S. law, is currently unable to conduct inspections of the work of our auditors without the approval of the Chinese authorities asauthorities. In May 2013, the PCAOB announced that it relateshad entered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission (“CSRC”) and the PRC Ministry of Finance, which established a cooperative framework between the parties for the production and exchange of audit documents relevant to those operations, our auditor’s work related to our operations in China is currently not inspectedinvestigations undertaken by the PCAOB.PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively. The PCAOB continues to be in discussions with the CSRC and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with the PCAOB and audit Chinese companies with shares listed and traded on U.S. exchanges.

This lack of PCAOB inspections of audit work performed in China prevents the PCAOB from regularlyfully evaluating audits and quality control procedures of the independent registered public accounting firm which has a substantial role in the audit work of any auditors that was performed in China including that performed by our auditors.company. As a result, we and investors may bein our ADSs are deprived of the full benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of audit work performedauditors in China makes it more difficult to evaluate the effectiveness of our auditor’sthe audit procedures or quality control procedures of the independent registered public accounting firm which has a substantial role in the audit of our company as compared to auditors in other jurisdictionsoutside of China that are subject to PCAOB inspections, on all of their work. Investors maywhich could cause investors and potential investors in our stock to lose confidence in our audit procedures and reported financial information and procedures and the quality of our financial statements.

We may be adversely affected byIf additional remedial measures are imposed on five PRC-based accounting firms, including the outcomeindependent registered public accounting firm, which has a substantial role in the audit of theour firm, in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC, we may have difficulties complying with the requirements of the Exchange Act.

Proceedings instituted recently by the SEC against five PRC-based accounting firms, including an independent registered public accounting firm which has a substantial role in China.the audit of our company, could result in financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934.

TheIn December 2012, the SEC has broughtinstituted administrative proceedings against five PRC-based accounting firms, including an independent registered public accounting firm which has a substantial role in China,the audit of our company, alleging that these firms had violated U.S. securities laws and the accounting firms refusedSEC’s rules and regulations thereunder by failing to produce auditprovide to the SEC the firms’ work papers related to their audits of certain China-basedPRC-based companies that are publicly traded in the United States and which are the subject of certain ongoing SEC investigations. We were under investigationnot and are not the subject of any SEC investigations nor are we involved in the proceedings brought by the SEC for potentialagainst the accounting fraud. One offirms. If the fiveSEC is successful in the proceedings, it could result in the accounting firms, named in the SEC’s proceeding is an affiliate of(including the independent registered public accounting firm that issueswhich has a substantial role in the audit reports included inof our annual reports filed withcompany) losing, temporarily or permanently, the ability to practice before the SEC.

On

In January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of the fivethese firms from practicing before the SEC for a period of six months. The decision was neither final nor legally effective unless and until reviewed and approved by the SEC. In February 2014, four of these PRC-based accounting firms haveappealed to the SEC against this decision. In February 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to appeal this initial decision topractice before the SEC. The sanction willsettlement requires the firms to follow detailed procedures to seek to provide the SEC with access to Chinese firms’ audit documents via the China Securities Regulatory Commission. If the firms do not become effective until afterfollow these procedures, the full SEC appeal process is concluded and acould impose penalties such as suspensions, or it could restart the administrative proceedings.

In the event that the SEC restarts the administrative proceedings, depending upon the final decision is issued byoutcome, if the SEC. The accounting firms can then further appealincluding the final decision of the SEC through the federal appellate courts. We were not and are not involved in the proceedings brought by the SEC against these accounting firms. However, one of five accounting firms subject to the six-month practice bar in the initial administrative law decision is an affiliate of our independent registered public accounting firm.

If the SEC prevails in the proceedings, the five accounting firms will be barred from practicing before the SEC for six months and hence unable to continue serving as auditors for China-based companies listed in the U.S. Our independent registered public accounting firm may no longer be able to have their PRC-based affiliate carry outwhich has a substantial role in the audit procedures onof our mainland China operations and ourcompany were denied, temporarily or permanently, the ability to filepractice before the SEC, and we are unable to find timely another registered public accounting firm which can perform such substantial role in the audit of our company, our financial statements could be determined to not be in compliance with SECthe requirements could be adversely impacted. Failure to promptly remedy such non-compliancefor financial statements of public companies registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such a determination could ultimately lead to the delisting of our deregistration by the SEC or delistingADSs from the NYSE or both, and the valuetermination of your investment inthe registration of our ADSs could be materially and adversely affected.under the Exchange Act, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

Overview

We were established as a joint stock limited company under the Company Law of the PRC on March 6, 1996, and have conducted our business for sixteentwenty years. Our legal name is , and its English translation is Guangshen Railway Company Limited. Our registered office is located at No. 1052 Heping Road, Shenzhen, Guangdong Province, The People’s Republic of China, 518010. Our telephone number is(86-755)2558-8150 and our fax number is(86-755)2559-1480.

In May 1996, our H shares (stock code: 00525) were listed on the HKSE and our American Depositary Shares, or ADSs (ticker symbol: GSH), were listed on the NYSE. Our A shares (stock code: 601333) were listed on the Shanghai Stock Exchange in December 2006. We are currently the only PRC railway enterprise with shares concurrently listed in Shanghai, Hong Kong and New York.

We are mainly engaged in passenger and freight transportation businesses ontheShenzhen-Guangzhou-Pingshi Railway, which is 481.2 kilometers long, running vertically through Guangdong Province. TheGuangzhou-Pingshi Railway is the southern part ofBeijing-Guangzhou Railway, which connects Northern China with Southern China. TheGuangzhou-Shenzhen Railway is strategically located and links with major railway networks in China, including theBeijing-Guangzhou,Beijing-Kowloon,Sanshui-Maoming,Pinghu-Nantou, andPinghu-Yantian lines, as well as to the Kowloon Canton Railway in Hong Kong, which is an important component of the transportation network of southern China, as well as the only railway channel linking Hong Kong with Mainland China. TheGuangzhou-Shenzhen Railway is currently one of the most modern railways in the PRC as well as the first wholly fenced railway with four parallel lines in the PRC that allows passenger trains and freight trains to run on separate lines.

Passenger transportation is our principal business. As of December 31, 2013,2015, we operated 229239 pairs of passenger trains each day, including 105 pairs of intercity high-speed passenger trains between Guangzhou and Shenzhen (including 19.5 19stand-by pairs), 13 pairs of Hong Kong Through Trains (including 11 pairs ofCanton-Kowloon Through Trains, 1 pair ofZhaoqing-Kowloon Through Trains and 1 pair ofBeijing/Shanghai-Kowloon Through Trains) and 111121 pairs of long-distance trains. We adopt ahave adopted an“As-Frequent-As-Buses” operating model by dispatching one pair of our domestically manufactured electric multiple units trains, known as “China RailwayHigh-Speed”High-Speed trains” or “CRHs”,“CRHs,” every 10 minutes on average during peak hours between Guangzhou and Shenzhen. Thethrough-trains passing Hong Kong jointly operated by us and the MTR Corporation Limited (“MTR”) are one of the most important means of transportation between Guangzhou and Hong Kong. We have organized and operateoperated a number of long-distance trains running from and to Guangzhou and Shenzhen that linked with most of the provinces, autonomous regions and municipals across the nation.

Freight transportation is another important segment of our business. We arewell-equipped with comprehensive freight facilities and are able to efficiently transport full load cargo, single load cargo, containers, bulky and overweight cargo, dangerous cargo, fresh and live cargo, and oversized cargo. Our rail lines operated are closely knitted with the major ports in Guangzhou and Shenzhen and are connected to several large industrial zones, logistics zones and plants and mines in the Pearl River Delta region via the railroad sidings. The major market of our freight transportation business is domestic mid- tomid-to long-distance transportation, and we enjoy competitive advantages in domestic mid- tomid-to long-distance freight transportation.

We have extended our passenger and freight transportation business to include railway operation services with the commencement ofWuhan-Guangzhou Passenger Railway Line in December 2009. As of the date of this annual report, we have provided such services to Wuhan-Guangzhou Passenger Railway Line Co., Ltd. in December 2009. We have also provided such service to, Guangdong Guangzhou Intercity Rail Transportation Company Limited, Guangzhou–ZhuhaiInter-city Railway Traffic Co., Ltd.,Guangzhou-Shenzhen-Hong Kong Express Rail Link Company Limited,Guangzhou-Zhuhai Railway Company Limited, Xiamen-Shenzhen Railway (Guangdong) Company Limited, Ganzhou-Shaoguan Railway Company Limited, Nanning-Guangzhou Railway Company Limited, and Xiamen-ShenzhenGuiyang-Guangzhou Railway Company Limited. With the successful completion and commencement of operation of a series of high-speed railways andinter-city railways in the “Pan Pearl River Delta”,Delta,” our geographical coverage of railway operation service will be more extensive. We also intend to grow our business through railway operation services.

Background, Restructuring and Acquisition

The railroad system between Guangzhou and Shenzhen was part of the original“Canton-Kowloon” railroad, which began operations in 1911. In 1949, following the establishment of the PRC, the railroad was divided into two sections, with the first linking Guangzhou and Shenzhen, and the second, across the Hong Kong border and separately owned, linking Luohu and the Kowloon peninsula in Hong Kong. The Guangzhou to Shenzhen railroad has been operated since 1949 by asub-division of the Guangzhou Railway Bureau, a predecessor to GRGC.

In 1979, Guangshen Railway Company, our predecessor, in conjunction with KCR,Kowloon–Canton Railway (“KCR”), which has been merged into the MTR Corporation Limited, or MTR, was engaged in the joint operation of Hong Kong Through Train passenger services between Guangzhou and Hong Kong.

In 1984, to exploit the rapid growth in the Pearl River Delta, Guangshen Railway Company, our predecessor, was established pursuant to the approval of the State Council as astate-owned enterprise administered by the Guangzhou Railway Bureau. At that time, Guangshen Railway Company had only asingle-line railroad. Since then, large capital expenditures have been made to expand and upgrade its facilities and services. In 1987, construction of the second line was completed. In 1991, Guangshen Railway Company began the construction of asemi-high-speed rail line and purchased locomotives and passenger coaches, which can provide passenger train services at speeds of more than 160 kilometers per hour. Commercial operation of the EMU trainselectric multiple units (“EMUs”) commenced in December 1994.

We were established as a joint stock limited company on March 6, 1996 following the Restructuring, which was carried out to reorganize the railroad assets and related businesses of Guangshen Railway Company and certain of its subsidiaries. As part of the Restructuring, 2,904,250,000 state legal person shares, par value RMB1.00 per share, of our Company were issued to GRGC, astate-owned enterprise controlled by the MOR. Guangshen Railway Company retained the assets, liabilities and businesses not assumed by us, including units providing staff quarters and social services such as health care, education, public security and other ancillary services, as well as subsidiaries or joint ventures whose businesses do not relate to railroad operations and do not compete with our businesses. As part of our Restructuring, Guangshen Railway Company was renamed Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company.

Since April 1, 1996, we have been able to set our own prices for our EMU train services and charge a premium over average national prices for our other passenger and freight train services. See “ITEM 4. INFORMATION ON THE COMPANY—B. Business Overview—Regulatory Overview—Pricing” for a more detailed description of our pricing scheme.

We completed our initial public offering of class H ordinary shares, or H shares, and our American depositary shares, or ADSs, in May 1996. In that offering, we issued a total of 1,431,300,000 H shares, par value RMB1.00 per share. Our H shares are listed for trading on the HKSE and our American depositary shares, or ADSs, each representing 50 H shares, are listed for trading on the NYSE.

On November 15, 2004, we entered into an asset purchase agreement with Yangcheng Railway Company to acquire the railway transportation business between Guangzhou and Pingshi and related assets and liabilities, or the Acquisition. In order to finance such Acquisition, on December 13, 2006, we issued 2,747,987,000 A shares that are now listed for trading on the Shanghai Stock Exchange (stock code: 601333) and raised approximately RMB10.0 billion from the A Share Offering. After the A Share Offering, approximately 41% of our issued and outstanding shares were owned by GRGC, while institutional and public shareholders own approximately 59% of our issued and outstanding ordinary shares, including A shares, H shares and ADSs.

On December 28, 2006, we paid RMB5.27 billion out of the proceeds raised from the A Share Offering to Yangcheng Railway Company. On January 1, 2007, the railway transportation business of theGuangzhou-Pingshi Railway came under our control as a result of the Acquisition. As a result, our operations expanded from a regional railway to a national trunk line network and our operating railway distance extended from 152 kilometers to 481.2 kilometers, running vertically through the entire Guangdong Province. In June 2007, we paid the remaining balance in the amount of RMB4.87 billion to Yangcheng Railway Company.

In April 2010, in order to further reduce our administrative expenses and improve the overall efficiency of our administration system, we made efforts to optimize our internal management structure, including establishing the General Administrative Department, the Human Resources Department, the Planning and Finance Department, the Operation Management Department and the Audit Department, each of which is under the supervision of our general manager, and outsourcing all other administrative functions to external service providers.

On November 30, 2013, we entered into an agreement to acquire the freight service business and related assets of China Railway Express Co., Ltd. Guangzhou Branch (“CREC”) and China Railway Container Transport Co. Ltd. Dalang Processing Station (“CRCT”), the subsidiaries of CRC which operate freight service business. The purchase considerations for CREC and CRCT were approximately RMB102.3 million and RMB79.9 million, respectively. On the same day, control of the assets and operations of CREC and CRCT were transferred to us. The results of the operations of the above-mentioned entities have been included in our consolidated comprehensive income statement from November 30, 2013 onwards.

On May 29, 2014, we entered into an agreement with Guangzhou Railway (Group) Company Guangzhou Railway Economic Development Co., Ltd. to acquire certain assets and liabilities in relation to the freight service business. The total amount of assets were RMB161.7 million and total amount of liabilities were RMB39.3 million. The purchase price was approximately RMB122.4 million.

On October 20, 2014, we entered into an agreement with Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company to acquire approximately an additional 17.7% equity interest in Zengcheng Lihua Stock Company Limited (“Zengcheng Lihua”). The purchase price was approximately RMB 4.7 million. Upon the completion of the acquisition, we held an aggregate of approximately 44.7% equity interest in Zengcheng Lihua. On February 12, 2015, we obtained control of Zengcheng Lihua and began to consolidate its financial statements from that date.

Service Territory

Our rail lines traverse the Pearl River Delta and also run vertically through Guangdong Province, an area which benefited early from the PRC economic reform policies that began in the late 1970s. Throughout the 1980s and early 1990s, the economy of the Pearl River Delta, fueled by foreign investments, grew rapidly. The Pearl River Delta is currently one of the most affluent and fastest growing areas in China.

As of April 17, 2014,27, 2016, we had 48 stations situated on our rail lines, providing passenger and freight transportation services for cities, towns and ports situated along theShenzhen-Guangzhou-Pingshi corridors and Hong Kong Through Train passenger service, which we serve in conjunction with the MTR. We also provide railway operation services to other Chinese domestic railway companies.

TheShenzhen-Guangzhou-Pingshi railroad is an integral component of the PRC national railway network, and provides nationwide access to passenger and freight traffic from southern China to other regions of mainland China as described below:

Northbound. At Pingshi, our rail line connects with theBeijing-Guangzhou line, which is one of the major trunk lines linking southern China with Beijing and northern China. Another trunk line connecting northern and southern China, theBeijing-Hong Kong rail line, includes the section of our line from Dongguan to Shenzhen.

Southbound. Our line connects at Shenzhen with the rail line owned by the MTR that runs to Kowloon, Hong Kong.

Westbound. Our line connects with theGuangzhou-Maoming rail line operated by Guangdong Sanmao Railway Company, a company in which GRGC holds a 49.1% equity interest, thatwhich runs through the western part of Guangdong Province, connecting with other rail lines that continue on into the Guangxi Zhuang Autonomous Region, which provides access to southwestern China. Our line also connects with Guangzhou-Foshan-Zhaoqing Intercity Railway, which commenced operation on March 30, 2016 and was jointly invested by Guangdong Provincial Railway Construction Investment Group Co., Ltd. and the CRC.

Eastbound. Our rail line intersects at Dongguanconnects with theGuangzhou-Meizhou-Shantou rail line and Xiamen-Shenzhen rail line. Guangzhou-Meizhou-Shantou rail line is operated by Guangmeishan Railway Company, a company jointly established by GRGC, the Guangdong Provincial Railway Company and other public investors. A section of this line forms, along with our Dongguan to Shenzhen segment, a part of theBeijing-Hong Kong rail line, which terminates in Kowloon, Hong Kong.

The section of Xiamen-Shenzhen rail line in Guangdong Province is owned by Xiamen-Shenzhen Railway (Guangdong) Company Limited, a subsidiary of GRGC. We provide the operational services to Xiamen-Shenzhen Railway (Guangdong) Company Limited. At Pinghu, our rail line connects with two local port lines: one of them, Pingnan Railway, principally serves three ports located in western Shenzhen—Shekou, Chiwan and Mawan—and the other, Pingyan Railway, serves Yantian port, an internationaldeep-water port located in eastern Shenzhen. At the Huangpu and Xiayuan stations in Guangzhou, our line connects with Huangpu port and Xinsha port. Our rail line also connects with certain industrial districts, commercial districts and the facilities of many of our customers through spur lines, which are rail lines running off the main line that are used and typically financed by a freight customer or a group of freight customers and maintained by us for a fee. We believe that the customers connected to these spur lines and customers with goods that must be shipped through these regional ports are likely to use our services on a long-term basis.

long-termCapital Expenditure basis.

Our capital expenditure includes payments for acquisition of fixed assets and construction-in-progress, and prepayments for fixed assets, net of related payables. In 2013, 2014 and 2015, our total capital expenditure were RMB1,376.6 million, RMB999.6 million and RMB1,292.3 million, respectively.

For more information concerning the Company’s principal capital expenditure and divestitures currently in progress, including the distribution of these investments geographically and the method of financing, see “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - B. Liquidity and Capital Resources” and “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - F. Tabular Disclosure of Contractual Obligations.”

Business Operations

Our principal businesses are railroad passenger, transportation, freight transportation, railway network usage and othertransportation-related services, which collectively generated 93.0%93.1% of our total revenue in 2013.2015. The remaining 7.0%6.9% of our total revenue in 20132015 mainly consistsconsisted of on-board catering services, leasing, sales of materials and supplies, maintenance and repairsale of trains,on-board catering services, labor servicesgoods and other businesses related to railway transportation.

In 2013, we pursued2015, affected by the operating objectives set out by our board of directors and strived to overcome the impact of unfavorable factors such asincluding the slowdown of the macro-economy, the competition in macroeconomic growth, sluggishthe railway passenger transportation market and a weak demand in the railway freight transportation market, intense competitionour passenger and freight transportation business continued to decline, which resulted in weak growth in our total revenue. We responded with a series of measures to increase our revenue and reduce expenses. With the goal to increase our revenue, we have been exploring opportunities in the railway passenger and freight transportation marketmarkets by making arrangements to open three new pairs of cross-network EMU traveling between Guangzhou East and frequent natural disasters. We fortified infrastructure safety, enhancedChaozhou-Shantou, strengthening the operating plansales capability of the trains, reformedHunan-Guangdong southern express lines for freight transportation, organization, implemented transportation volume-increasing and revenue-increasing measures, further diversifiedwhile extending the scope of our operations,railway operation services, and adding railway operating services for Ganzhou-Shaoguan Railway Company Limited, Guiyang-Guangzhou Railway Company Limited and Nanning-Guangzhou Railway Company Limited at the same time. At the same time, we enhanced our cost controls, which helped reduce our general and non-production expenses. As a result of those measures, we were able to record slight growth in the management of our operations,overall operating revenue with more substantial growth in operating profit and ensured the safety and stability of transportation and production. Both operating revenues and passenger volume increased while the tonnage of freight started to rebound since July 2013, reflecting initial results of the freight reform. However, our net profit still recorded a decline due to increases in salaries and fees, expenses for railway network and other operating costs.year-on-year.

In 2013,2015, we achieved a passenger delivery volume of 91.085.4 million persons, representinga year-to-year increase decrease of 7.5%5.3%; a tonnage of freight of 20.348.4 million tonnes,tons, representinga year-to-year decrease of 4.8%,6.1%; generating operating revenues of RMB15,801RMB15,725 million, representinga year-to-year increase of 4.7%6.3%; consolidated profits attributable to equity holders of RMB1,274RMB1,071 million, representinga year-to-year decrease increase of 3.4%61.8%; and basic earnings per share of RMB0.18.RMB0.15.

The table below summarizes our railroad and related business revenue and traffic volume for the periods indicated: