China to reinvigorate public-private partnerships

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Chinese Finance Minister Xiao Jie pledged to promote more standardized operations of public-private partnership (PPP) projects, speaking at a press conference on the sidelines of the Fifth Session of the 12th National People's Congress (NPC) on Tuesday.

“The development of PPP in China is still in its exploratory stage,” Xiao said in Beijing. “But the implementation of PPP projects is already accelerating.”

Reporters ask questions on China's financial work and fiscal and taxation reforms at a press conference at the Fifth Session of the 12th NPC in Beijing on March 7, 2017. /NPC.gov.cn

According to Xiao, for those pilot PPP projects under the Ministry of Finance, the average implementation period of the first batch of projects was about 15 months, while that of the third batch had been shortened to 11 months.

By the end of 2016, agreements had been signed on 1,351 projects with a total investment of 2.2 trillion yuan (about 319 billion US dollars) and an implementation rate of more than 30 percent. The number of projects and the amount of investment had increased by over four times, compared with the beginning of last year.

Chinese Finance Minister Xiao Jie attends a press conference on the sidelines with the Fifth Session of the 12th NPC in Beijing on March 7, 2017. /NPC.gov.cn

PPP refers to long-term cooperation between governments and private companies on projects that are mainly funded and operated by the latter and supervised by the former. PPP projects have existed in China since the 1980s, but financing has been slow to come.

Zhou Linjun, a PPP expert and part-time professor at China’s Southwest University of Political Science and Law and Chongqing University, believes the reemergence of PPP in China is an embodiment of growing market demand in public industries. He stressed that special attention should be paid to some irregularities in the development of PPP, including irregularities in the implementation and operation of projects as well as policies, measures and even the choice of words.

People should not only pay attention to the techniques in terms of procedures, but also the comprehension of theories and essentials, with the latter as the gist of PPP, Zhou noted.

Based on PPP, the Asian Development Bank signs agreements with 10 commercial banks to support Dynagreen Environmental Protection Group in developing clean municipal waste-to-energy projects in small and medium-sized cities in China on February 28, 2017. /CFP Photo

“We will continue to promote more standardized operation of PPP projects through optimized financing environment and greater support to their implementation, putting an emphasis on the guiding role of fiscal fund,” said the Chinese Finance Minister.

Government support to PPP

“We must implement and improve policies and measures on facilitating private investment and deepen public-private partnership,” said Chinese Premier Li Keqiang when delivering the government work report at the opening meeting of the Fifth Session of the 12th NPC on March 5.

Li mentioned PPP in the government work report for the third consecutive year.

On March 5, 2014, Li stated that China would “formulate measures for non-state capital to participate in investment projects of central government enterprises, and allow non-state capital to participate in a number of projects in areas such as banking, oil, electricity, railway, telecommunications, resources development and public utilities.” He added that the government would “formulate specific measures to permit non-public enterprise participation in franchising.”

A road project based on PPP in Anqing in east China's Anhui Province is completed on September 27, 2016. /CFP Photo

The Finance Ministry set up a PPP Work Leading Group on May 26, 2014, and a PPP Center in December the same year, while naming 30 pilot projects for PPP in November 2014.

Meanwhile, the National Development and Reform Commission (NDRC), China’s top economic planner, designated 80 pilot projects in May 2014 to encourage the participation of non-state capital. It also released a draft of management measures on franchising of infrastructure and utilities to seek opinions among the public.

In addition, the ministry and the NDRC released a series of circulars and guidelines on the promotion of PPP models and the implementation of pilot projects.

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