The Shanghai bourse has come out with the guidelines for listing of public-private partnerships (PPP) in China, a move that will help those financing infrastructure projects.
Listing priority will be given to PPP projects that support the development of the Xiongan New Area, Beijing-Tianjin-Hebei synergetic development, Belt and Road Initiative, Yangtze River Economic Belt development and those for rejuvenating old industrial bases, and other projects in alignment with the national strategic development.
PPP projects with the participation of industry leaders, and those highly market-oriented, with stable public demands and predictable cash flow, would also be encouraged to list, said the circular.
The circular specified that PPP projects that acquire fees when the projects are launched can explore securitization of future yields based on contract agreements, and set reasonable securitization rates.
Project companies need to have the capability to operate constantly, with complete and healthy internal control systems, and have no record of false disclosure or defaults, or black marks in credit records.
“The guidance will help brokerages, subsidiaries of funds, and the project company to operate securitization in a standard manner, and will help strengthen risk management and protect investors’ legal rights,” the circular said.
Analysts said that enabling securitization of PPP projects will encourage more investors to get involved in PPP projects, as the measure to long-term yields is clarified, and institutions like trusts are more willing to participate in such projects with stable and steady returns.
“Securitization of PPP projects will provide investors with more liquidity, and more channels to exit from projects,” said a research note from Zhongtai Securities.
According to BRI Data, a market research and information provider, PPP projects with combined value of 3.17 trillion yuan ($478.9 billion) were transacted between January and September 2017. In September alone, projects worth 466 billion yuan were transacted.
“China’s PPP market has been expanding fast and has great potential. With more incentives for investors in terms of more liquidity and long-term yields, PPPs will play a more significant role in financing China’s economic development,” said Deng Xiyin, an analyst with Chang’an Trust.