The National Development and Reform Commission (NDRC) released a policy document last week which will provide more financial support for private companies, including the chance to raise funds through bond issuances or securitisation.
Full or partial equity transfers from the public to the private sector should also be permitted, according to the guidelines. The NDRC also said private investors must be considered when a PPP policy is drawn up.
“The concept of PPP in a highly state-dominated economy like China has been a continuing conundrum for policymakers," said Hong Kong-based project finance expert John Yeap of Pinsent Masons, the law firm behind Out-Law.com. "Accepted wisdom is that private sector investment in capital intensive infrastructure can optimise its performance through instilling financial discipline and encouraging innovative ways to extract better returns on investment. Yet in China large state owned enterprises have had the financial capital and technical capability to deliver some of the largest and most complex infrastructure developments, thereby limiting the role for private sector participation."
"The new directive, if properly implemented, should level the playing field for private participation, though the interest of such players in such assets, and the ability of such players to be competitive, particularly if their cost of capital is higher than state owned enterprises, remains to be seen," said Yeap,
“The PPP market in China is both a huge opportunity and challenge,” said infrastructure expert Graham Robinson of Pinsent Masons. “Levels of public sector debt in China are high and debt caps on further borrowing that increases the level of debt to unsustainable levels means that China needs to attract private capital to invest in infrastructure.”
Robinson said China introduced PPP laws in 2013 and a pilot programme of over 1,000 PPP projects was introduced.
“The market has been slow to adopt new PPP opportunities and especially in attracting any foreign capital,” Robinson said. “The potential market is huge but the challenges are still large and debt levels need to be reduced.”
In January 2017 state-run news agency Xinhua reported that China was planning to boost PPP in countries involved in its Belt and Road infrastructure initiative.
To date, China is reported as running 14,220 PPP projects valued at 17.8 trillion yuan ($2.7 trillion).