Xiongan to reap benefits of private-public ventures

Private and public ventures are expected to help transform infrastructure projects, and public services, in Xiongan New Area, a new economic zone about 100 kilometers southwest of Beijing.

Within the next 20 years, infrastructure investment is expected to top 4 trillion yuan ($583 billion; 524 billion euros; ￡457 billion), Gao Ting, head of China strategy at UBS Securities Co, said in the Huaxia Times.

"Public-private partnership has become a supplementary strategy for governments, especially local governments, to raise funds for hard infrastructure. The introduction of the PPP mode in Xiongan can establish a sustainable investment and financing system for public goods, which alleviates greatly the pressure on government funds," says Yang Yongheng, vice-director of the Center for Public-Private Partnership at Tsinghua University.

"More important, it enables the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities and services traditionally procured and delivered by the public sector."

The new area's infrastructure investment is estimated to be 4 trillion yuan within 20 years, the Huaxia Times quoted GaoTing, head of China strategy at UBS Securities, as saying.

Xiongan's infrastructure build-out will cover 100 square kilometers initially, expand to 200 square kilometers and eventually occupy a space of about 2,000 square kilometers, similar to Shenzhen in the South now, according to the government.

The government is looking to public-private partnership, a collaborative investment model between government and private companies, as a way to fund infrastructure projects amid concerns over high local government debt.

"We will explore new management models in the area, deepen the reform of the administrative system, explore the system reform in investment and financing, establish a long-term stable investment mechanism and attract social capital to participate in the construction of the new area," He Lifeng, minister of the National Development and Reform Commission, told Xinhua News Agency in April.

The remarks have been interpreted as meaning that PPP may be one of the main models to construct the new area.

PPP has developed rapidly, especially since 2014. More than 12,000 PPP projects were registered by the end of the first quarter of this year, with total investment of 15 trillion yuan, according to the China Public-Private Partnership Center of the Ministry of Finance.

It is an innovation model under which companies and social capital participate in the delivery of public infrastructure and services, and is one of the routes of supply-side structural reform, including concession and contracting out of public services, says Yang.

The biggest advantage of PPP is that it can improve the investment, operation and management efficiency in infrastructure and public services sectors, says Xue Lan, dean of the School of Public Policy and Management at Tsinghua University.

Private companies or individuals who provide investment can get franchises in related fields by working with governments, he says.

For governments, the cooperation will reduce its burden of facility operation and maintenance, and will increase supply efficiency of public products and services, he adds.

However, Yang warns that the PPP model still has some problems in spite of a big push by central and local governments, for example fake PPP projects, disputes over the model and a lack of government capacity to manage PPP projects.

The PPP projects that are suitable in municipal infrastructure, transportation and logistics, water and sewage, and environmental protection, should combine closely with the needs of the Xiongan New Area's development, Yang says.

mengfanbin@chinadaily.com.cn