PPP financing eyed for growth, improved livelihoods

BEIJING - China is counting on a financing mode called "public-private partnership" (PPP) to fund costly infrastructure and public service projects.

PPP refers to long-term cooperation between governments and private companies on projects, which are mainly funded and operated by the latter and supervised by the former.

At an executive meeting on Wednesday, China's cabinet reiterated the significance of PPP and unveiled fresh measures to encourage more PPP projects in transportation, environmental protection, medical and old-age care.

PPP has existed in China since the 1980s, though public money and government bonds are the main financing channel.

Confronted with mounting local government debt and a pressing need to fund urbanization and cope with a rapidly aging population, China released two PPP guidelines last year in the hope of leveraging more private capital.

On Wednesday, the cabinet said the government will streamline approval procedures for PPP projects and give them adequate land to use. It did not provide a timeline or much detail, but said PPP projects in public services will enjoy tax breaks and other financial rewards.

PPP project operators are encouraged to directly solicit money from the capital market, and social security funds and insurance premiums are allowed to invest in these projects, the cabinet said.

It also promised to set up a "dynamic price subsidy mechanism" to make sure public services are priced according to the fluctuating cost of resources, for the benefit of both PPP operators and the public.

"These measures signal that the government attaches great importance to PPP financing," said Sun Jie, a senior researcher with the Chinese Ministry of Finance (MOF).

Where as previous PPP guidelines mainly focused on infrastructure, public services are targeted this time.

Jin Yongxiang, general manager of Beijing-based consulting firm Dayue, which has a lot of PPP experience, said more investment in this sector can not only drive economic growth, but also improve people's livelihoods.

PPP projects have made little progress since the first guideline was issued by the MOF last September.