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China to promote use of PPP in Belt and Road projects

China will promote the use of public private partnership (PPP) contracts in countries involved in its Belt and Road infrastructure initiative, state-run news agency Xinhua has said.16 Jan 2017

Belt and Road, formerly known as One Belt, One Road or more properly as the Silk Road Economic Belt and 21st Century Maritime Silk Road initiative, is a development strategy that focuses on land and sea based connectivity from China to major markets in Europe, Asia and the Middle East.

The 'belt' refers to land-based routes, with several 'transport corridors' identified to reach key markets in 64 countries, while the 'road' refers to a maritime route through the South China Sea, South Pacific Ocean and Indian Ocean.

China plans to work with countries along each of these transport routes to finance and deliver projects, with a focus on energy and transport infrastructure.

He Lifeng, deputy head of China's National Development and Reform Commission (NDRC) told the 15th China Enterprise Development Forum that NDRC and several other departments have developed a plan to boost the PPP model in countries along the routes. He did not give more detail, Xinhua said.

Innovative financing models are needed as the Belt and Road projects often require large investments that are slow to show a return, He said, according to Xinhua.

PPP project operators in China can solicit money from the capital markets, and social security funds and insurance firms are allowed to invest in PPP projects, Xinhua said.

Infrastructure expert Jonathan Hart of Pinsent Masons, the law firm behind said: "For some time now, China’s Belt and Road initiative has been seen as collective banner under which a significant range of infrastructure might be procured and brought into service. When comparing this with programmes under development in other parts of the world, it is possible to overwhelmed by the scale and ambition under consideration."

"These most recent announcements from He and the NDRC are a helpful addition to public commentary upon the initiative in that they demonstrate the consideration being given as to how the infrastructure will be funded. There remains a huge interest in the provision of external finance for infrastructure assets in global markets, but PPP as a concept can mean a range of different potential solutions. It will be interesting to see how these exciting ideas are going to be developed in more detail and carried forward," Hart said.