The Chinese government will intensify efforts to promote more standardized and rapid development of public-private partnerships, especially for projects in the public service sector.
This is also part of the government’s effort to encourage private investment across the country.
New measures will be introduced to encourage the partnerships, or PPP, especially for public services, as was decided at the State Council’s executive meeting chaired by Premier Li Keqiang on July 7.
Premier Li said that while the country has seen much progress in promoting PPP in the past two years, a variety of institutional barriers still hinder PPP development.
“We need to work hard to address these problems in PPP promotion, for example, government functions overlapping, and policies and legislations not yet ready. Only by solving them can we drive investment more effectively,” the Premier said.
Taxation policy will be tailored to better suit the financing system of PPP. The meeting also calls for solid research prior to PPP projects implementation.
The Premier raised the idea of PPP development at a State Council’s executive meeting in October 2014, suggesting that doors should be open to social capital, especially private capital, in more areas.
China’s private investment growth has been slowing for the first half of the year, triggering concerns from central government departments. The State Council has just finished a sweeping examination of the reasons for such a slowdown across the country from May to June. It was noticed that many private companies are reluctant to join PPP projects for fear that their interests will be affected.
“At the moment, private investment is slipping, and PPP will serve substantially in driving private business development,” Premier Li said.
Another issue with PPP in China is the potential imbalance in market access of State-owned enterprises and private investors. Local governments tend to work with SOEs rather than private investors.
This leads to the pressing demand for regulations to shore up PPP development, which was also discussed at the meeting on July 7.
In June, The Ministry of Finance announced that procedures of PPP legislation have begun, and a draft has been circulated around the departments concerned for consultation.
The Premier urged accelerating PPP legislation with clear accountability.
This year has seen more than 600 PPP projects implemented, 23.8 percent of the signed PPP contracts. According to the Ministry of Finance, 39 percent of them have private business partners.
Facing such pressure of economic slowdown, policies such as administrative streamlining, expanded market access and favorable taxation may help boost private investment, said Wang Manchuan, secretary-general of the China Society of Administrative Reform.
“However, the government must let private business earn what their investment should make to ensure their interests. That’s one of the keys to enhance private investment,” Wang added.