Business / Economy

China to fund projects worth $1.6 trillion through PPP

(Xinhua) Updated: 2016-08-16 09:05

China to fund projects worth $1.6 trillion through PPP

SHANGHAI - China aims to fund infrastructure and public projects worth 10.6 trillion yuan ($1.6 trillion) through public private partnerships (PPPs) to leverage investment from the private sector, an official said on Monday.

Authorities aim to fund a total of 9,285 infrastructure and public service projects through PPPs, said Shi Yaobin, China's vice finance minister, at a forum in Shanghai.

China's finance ministry has set up a 180-billion-yuan fund supporting the financing of PPP projects and is considering revising related fiscal and tax policies to facilitate implementation of the projects.

Chinese authorities have explored funding infrastructure and public works through the PPP model since late 2013 amid growing concerns over risks around rising local government debts incurred through local financing vehicles.

Such vehicles had been borrowing short-term funds on the government's behalf to finance long-term projects, leading to a mismatch in maturity that has caused many to question the ability of local governments to service these debts.

To address the problem, authorities have sought to let local governments issue municipal bonds while attracting private sector investors to meet the funding shortfall.

Over the past two years, the PPP model has been expanded to fund projects including energy, transportation, environmental services and senior care.

The government has also rolled out demonstration projects with participation by private investors to promote the PPP model, but with limited success.

Investors from the private sector still have reservations about participating in PPPs due to concerns about a lack of policy clarification, uncertainty about profitability and feasible exits, said Sun Xiaoxia, director of the ministry's finance department at the forum on Monday.

The finance ministry will publish two lists of demonstration projects with total investment value of 800 billion yuan. It said 48.4 percent of these projects have been implemented, with domestic private investors, mixed-ownership companies and foreign-funded firms accounting for 45 percent.

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