Across The Border | Investors grow shy of China’s public-private projects
Just not enough return on their money
Investors have grown shy of China’s public-private partnership (PPP) schemes because of their lack of returns and legal protections for private firms.
PPP is a business model where private companies bid for and take over public projects — such as bridge or road building and running prisons — from local governments. Companies seek long-term profits through construction and operation of such projects.
China’s central government has been encouraging the model over the past two years to boost infrastructure investment and shore up slowing economic growth with private capital while not adding pressure to already heavily-indebted local governments.
Progress, however, is far from satisfactory.
Among 7,721 projects under the official PPP scheme, only 21.7 per cent of them had properly started by the end of March, according to the website of the Public-Private Partnerships Centre which operates under the finance ministry.
The value of contracted projects reached nearly 1 trillion yuan (HK$1.18 trillion) in the second half of last year, but in the first quarter this year, the contracted projects were valued at just 300 billion yuan, according to a research report by Minsheng Securities analyst Zhu Zhenxin.