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The BBC's Martin Patience says there was "huge public anger" after a recent crash that killed 40 people
The State Council said the safety of new projects would be re-evaluated before approval could be given.
Safety checks would also be carried out on existing lines, and speed limits would be put in place.
The government's handling of the Wenzhou crash, which killed 40 people, caused widespread anger.
An official diktat ordering journalists in state-run media
groups not to investigate the causes of the crash was leaked on the
internet, leading to allegations of a cover-up.

Four carriages were shunted off a viaduct after an apparent signal failure
And a government order was leaked advising local lawyers that
they needed authorisation to take on compensation cases of victims.
The high-speed rail network is one of the country's flagship projects.
But critics have accused the government of ignoring safety warnings in its rush to complete the construction.
The State Council announced its review of safety after a meeting chaired by Premier Wen Jiabao on Wednesday.
"We will suspend for the time being the examination and
approval of new railway construction projects," the council said in a
statement.
But the council added: "China will unswervingly continue its development of high-speed railways."
On Thursday the country's biggest rail construction firm,
China Railway Group, announced it had dropped a plan to raise about
6.2bn yuan ($970m; £600m) through a share placement.
"Given changes in the country's macro policy, there have been
uncertainties in regulatory approvals," the firm said in a statement.
The Railways Ministry is still investigating the cause of the
crash, but regional rail officials have said a signalling failure was
responsible.
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