The central government is planning to issue documents aimed at supervising all phases of fixed asset investment projects by local governments.
The aim is to further contain risks from public-private-partnership projects and foster economic growth through high-quality investment projects, according to a senior official with the nation’s top economic regulator.
Under the government plan, information on local government fixed asset investment will be collected and analyzed, with the main emphasis placed on regulating financing in each phase while implementing the projects, said an official with the National Development and Reform Commission.
The official declined to be identified, citing a lack of authority to speak to the media.
Projects that have already received approval will be scrutinized, the official said.
Detailed rules separating the repayment responsibilities of entities in public and private partnership projects, and a viable funding channel to support infrastructure projects, are also planned, the official said.
The official added that these measures will be part of efforts to prevent such projects from increasing local governments’ debt burden.
“There is much to be done to improve efficiency of investment, which needs to play a key role in improving the quality of public services and production capacity,” the official said.
The government has issued guidelines to encourage public-private-partnership projects to appeal to private investors to support infrastructure projects. However, the large amount of money from government entities going toward such projects is posing risks to government debt, as there is no clear legal framework to regulate payment obligations.
Zhang Deli, an analyst with Lianxun Securities, wrote in a research note that with sustained strong supervision of such projects, it will take a “rather long period of time” to see these projects leading to a major recovery in fixed asset investment.
This week, the government issued calls for a more proactive fiscal stimulus. Fixed asset investment has only witnessed tepid growth in the first half of the year.
In the first six months, such investment grew by 6 percent year-on-year to 29.7 trillion yuan ($4.3 trillion), 2.6 percentage points lower than in the same period last year, according to the National Bureau of Statistics.
The less-developed southwestern provinces of Guizhou and Yunnan have been more active in promoting fixed asset projects, according to a report by the NDRC on July 24.
The report said the government would improve regulation after it was found that some projects had not been implemented since being approved.