Intended to attract more capital for infrastructure
China's top economic planner unveiled a public-private partnership (PPP) project list on Monday, a move that analysts said meets China's need for stabilizing economic growth.
In a bid to promote the PPP model and encourage private investment, the National Development and Reform Commission (NDRC) has built a PPP project library which currently includes 1,043 PPP projects worth 1.97 trillion yuan ($317.76 billion), said a statement posted on the NDRC's website.
The projects are in several sectors including transport and water conservancy, and are based in 25 provinces and cities such as Xinjiang Uyghur Autonomous Region and Dalian, according to the statement.
The PPP model, under which both governments and private firms share investment and profits, is an important way to ease financing difficulties and has been promoted by the central government since 2014.
"Against the backdrop of an economic downturn, seeking investment is essential for stabilizing growth," Xu Hongcai, director of Economic Research Department of China Center for International Economic Exchanges, told the Global Times on Monday.
It is crucial to ensure enough capital for infrastructure construction because local governments are facing decreasing revenue, therefore the central government has seized on the PPP model as a solution, UBS said in a research note sent to the Global Times on Friday.
Land transaction fees have been a major revenue source for local governments in the past decade but it has seen a decline along with the sluggish real estate industry. The land transaction fee only accounted for 32 percent of local governments' income from January to April this year, compared with 59.8 percent in 2013 and 56.2 percent in 2014, according to data released by the Ministry of Finance.
However, only 10 percent of PPP projects have had private investors signed up so far, the UBS note said.
The cool feedback is due to unfamiliarity with the PPP model, Zhou Hao, an economist with ANZ Banking Group, told the Global Times on Monday, noting there may also be concerns over profit-sharing.
"Most PPP projects are about infrastructure and investors may hesitate over long-term investment," Zhou said, "but it [the PPP model] meets the needs of China's economy so it will undergo sound development."
In a bid to speed up involvement in these PPP projects, the NDRC's list contains many details including project location, specific operating models as well as contact information.
The next step should be to focus on several projects as models from which private investors can gain expertise of as well as confidence in the PPP model, according to Xu.
The NDRC has chosen 12 water conservancy projects as the first batch of PPP projects and will use the expertise gained to improve polices in a two-year period from April this year to March 2017, NDRC said on Friday on its website.
