PPPs in China making steady progress, says Moody’s | The Association of Corporate Treasurers

PPPs in China making steady progress, says Moody’s

Improved transparency around long-term funding, plus greater availability, have helped to drive an annual increase in PPPs

Public-private partnerships (PPPs) in China are enjoying a period of fertile development, according to Moody’s – with tie-ups and the projects they unleash benefiting from a more upbeat regulatory climate.

In a new report, the rating agency notes that regulations designed to improve transparency around long-term funding have provided private-sector investors with greater clarity for planning their financial commitments.

Furthermore, it points out, the increased availability of long-term funding in the financial system is likely to increase the attractiveness of China’s PPP projects among key players in the private sector.

That is because it will grant investors the confidence to match the long-term cash flow from such projects.

Moody’s figures show that the total number of PPP projects in China’s national database surged to 13,554 as of the end of June 2017.

That marks a significant improvement on the 11,260 recorded at the same stage of last year.

In addition, the total investment value of active ventures rose from ¥13.5 trillion halfway through 2016 to ¥16.4 trillion in the middle of this year – representing total growth of 21.5%.

Meanwhile, projects that have reached the implementation stage accounted for 20% of all PPP schemes as at the end of June this year, compared to 17% at the same point of 2016.

As Moody’s explains, the implementation stage is the penultimate step in China’s nationally recognised life cycle for such projects, as devised by the PPP Center at the Ministry of Finance. In full, the life cycle comprises:

  1. the identification stage;
  2. the preparation stage;
  3. the procurement stage;
  4. the implementation stage; and
  5. the project transfer stage.

Moody’s vice president and senior analyst Osbert Tang said: “Support from the central government has resulted in positive regulatory developments in China’s PPP framework, thereby enhancing the financing options available to PPP developers and investors.”

He added: “regulations that increase transparency and improve investor protections are positive for the ongoing development of the PPP sector.”

Moody’s subscribers can access the report – titled Cross-Sector: Public-private Partnerships are Making Steady Progress in China – via this link.

For previous The Treasurer coverage of PPPs in China, click here.

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