Chinese Public-Private Partnerships are Making Steady Progress, Says Moody’s

Public-private partnerships (PPPs) in China (A1 stable) continues to grow in number and investment value, with more projects advancing to the implementation stage this year, according to Moody’s Investors Service.

"Support from the central government has resulted in positive regulatory developments in China's Public Private Partnership (PPP) framework, thereby enhancing the financing options available to PPP developers and investors,” says Osbert Tang, a Moody's Vice President and Senior Analyst.

"And, regulations that increase transparency and improve investor protections are positive for the ongoing development of the PPP sector," adds Tang.

Moody's explains that the improved regulatory transparency of longer-term financing provides greater clarity to private sector investors.

Moreover, the increased availability of longer term financing will likely increase the attractiveness of China's PPP projects to the private sector, because it will allow investors to better match the long-term cash flow from such projects.

Moody's conclusions are contained in its just-released report titled "Cross-Sector: Public-private partnerships are making steady progress in China."

PPP projects in the national database grew RMB2.9 trillion or 21.5% for the six months to 30 June 2017, and these projects continued to advance through their development life cycle, with projects at the implementation stage accounting for 20% of all projects as of end-June 2017 compared to 17% at end-2016.

Moody's explains that the implementation stage represents the second last step in the Ministry of Finance China Public Private Partnerships Center's five-stage PPP life cycle, which comprises: 1) the identification stage, 2) the preparation stage, 3) the procurement stage, 4) the implementation stage, and 5) the project transfer stage.

And, there has been no material change in the mix among the three broad PPP procurement models (demand risk, availability payment and hybrid) during the six months between January and June 2017.

Moody's report points out that the total number of PPP projects in the national database increased to 13,554 at end-June 2017 from 11,260 at end-2016, a rise of 20.4%. And, their total investment value rose to RMB16.4 trillion at end-June 2017 from RMB13.5 trillion at end-2016, representing a growth of 21.5%.

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