Is PPP picking up under pressure on local finances?
my country has become the world's largest PPP market.
In the past few years, the development of the PPP industry has been like a roller coaster ride, first rushing up, and then stopping abruptly.
Today, the situation has improved, and "Promoting government-private partnerships (PPP) in a standardized and orderly manner") has been written into the "14th Five-Year Plan" and the 2035 long-term goal.
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In the spring of 2021, PPP will once again see a new wave of market conditions.
Data from the February 2021 report of the National PPP Comprehensive Information Platform Management Database Project of the PPP Center of the Ministry of Finance shows that since the beginning of this year, there have been 86 new projects with an investment of 139.9 billion yuan, an increase of 56.5 billion yuan or 67.7% year-on-year.
There were 23 net storage projects with an investment of 78 billion yuan, an increase of 45.3 billion yuan or 138.7% year-on-year.
As of April 25, 2021, there are 10,020 projects nationwide, with a total investment of more than 15 trillion yuan, and both projects and investment have increased slightly compared to before.
This project operation model called "government and social capital cooperation" is usually used in the field of infrastructure and public services.
Social capital undertakes most of the work of designing, constructing, operating, and maintaining infrastructure, and obtains a reasonable return on investment through "user payment" and necessary "government payment"; government departments are responsible for infrastructure and public service price and quality supervision, and Ensure that the public interest is maximized.
The advantage of PPP lies in enabling all parties to cooperate to achieve results that are more favorable than expected by acting alone: the government has fewer fiscal expenditures, and enterprises have lower investment risks.
my country has become the world's largest PPP market.
In the past few years, the development of the PPP industry has been like riding a roller coaster, first rushing up, and then abruptly stopped. After 2017, with the "No. 92" "Regulation of Government and Social Capital Cooperation (PPP) Comprehensive Information Platform Project Database Management Notice, "Circular 54", "Notice of the Ministry of Finance on Further Strengthening the Standardized Management of Government-Social Capital Cooperation (PPP) Demonstration Projects". The new asset management regulations and other strict regulatory policies, the transaction of PPP projects Both the number and scale show a rapid downward trend.
Today, the situation has improved, and "Promoting government-private partnerships (PPP) in a standardized and orderly manner") has been written into the "14th Five-Year Plan" and the 2035 long-term goal.
A person from a consulting agency in a province in central China told reporters that the re-emergence of PPP at the beginning of 2021 is related to the difficulty of local fiscal revenues and expenditures.
Because special bonds require local governments to match funds, this has increased the pressure on local finances in a disguised manner.
Therefore, local governments will choose PPP with longer spending time.
At the same time, policy financial institutions are also increasing their support for PPP.
The person from the above-mentioned consulting agency said that the policy-based financial institution supports PPP in all aspects this time.
For example, in terms of guarantees, general projects require full guarantees and mortgage guarantees, while PPP only requires credit enhancement guarantees, that is, the equity ratio of the project company.
Shareholders provide certain credit enhancement guarantees. Of course, local governments do not provide credit enhancement guarantees.
Zhang Pan, general manager of Shanghai Horizon Construction Investment Co., Ltd. (hereinafter referred to as "Horizon Construction Investment"), felt deeply about this wave of market conditions. He said that this year it is obvious that PPP projects in some places are accelerating.
Horizon Construction entered the PPP industry in 2016, and they are optimistic about the future of PPP.
Zhang Pan said that infrastructure investment is the largest market outside of real estate, with nearly 18 trillion yuan a year, and there is broad room for development.
After the top-down design by the Ministry of Finance and the National Development and Reform Commission, PPP is still the most standardized model for social capital to participate in infrastructure construction.
Coupled with the large amount of capital required for infrastructure PPP projects and strong financial attributes, it is more suitable for large-scale capital operations.
"Although the income is not high, it has the characteristics of long maturity and stable cash flow."
The recovery of PPP is a good thing for the industry, and the key is to control risks.
PPP project investment generally takes 10 years, 15 years, or even 20 years, which is long-term funds, and requires relatively high risk control capabilities.
For example, the "Guiding Opinions on Strengthening the Debt Risk Management and Control of Local State-owned Enterprises" recently issued by the State-owned Assets Supervision and Administration Commission clearly stated that "low-margin trade, financial derivatives, PPP and other high-risk businesses must be strictly controlled. Financing trade and false trade businesses are strictly prohibited. Major risks in production and operation".
Jin Yongxiang, chairman of Beijing Dayue Consulting Co., Ltd., believes that most of the state-owned enterprises participating in PPP projects are construction companies. Compared with simple project construction, PPP projects include pre-construction and post-operation. From this perspective, there are indeed certain risks, but risks It is equal to income.
"Under the background that the total construction volume of the whole society is shrinking as an inevitable trend, PPP promotes the transformation of construction enterprises to the entire industry chain business. More importantly, PPP enables local governments to transfer part of the project risks to social capital. Reduce the potential debt risk of state-owned enterprises." He said.
Choosing a good project is the consensus of all parties to prevent risks.
Zhang Pan said that there are "three good" standards in the evaluation of projects, that is, "good government, good partners, and good projects."
A good government refers to a local government with good economic development, strong financial strength, low debt, and honesty; good partners are mainly enterprises with strong construction and operation management capabilities and responsible responsibility; the main requirement of good projects is compliance Good, focus on supporting national policy directions, such as people's livelihood.
"We have a checklist for the negative list of PPP policies, including 58 risk points in 7 categories, including business environment and financial risks. When selecting items, they are scored one by one according to the table." At the headquarters of Shanghai Horizon Construction Investment, its business director Show reporters the entire process of investment projects, from local governments to project companies and even partners, all have strict selection standards and process management, and these have become their main means of preventing risks.
Zhang Pan told a reporter from China Youth Daily and China Youth Daily that the cycle of PPP projects is generally more than 10 years, and now it generally takes 20 years.
However, Horizon Construction is confident in the fundamentals of China's long-term economic improvement.
In this context, the focus is to do your own thing well, that is, to invest a lot of energy and patience to build the active management ability of project investment, financing, construction, and operation.
Lou Jiwei, member of the Standing Committee of the Chinese People's Political Consultative Conference and director of the Foreign Affairs Committee of the Chinese People's Political Consultative Conference, is one of the main promoters of China's PPP model. Earlier, he frequently mentioned a sentence that "the development of PPP must take root in China's realistic soil".
Lou Jiwei has gone through various stages of China's PPP development, and is well versed in the advantages and problems of PPP in China.
In his view, the previous PPP model focused on construction and neglected operations, performance appraisal was not perfect, government expenditure responsibilities were solidified and other problems were obvious, which directly led to the increased withdrawal of PPP projects in 2017 and the concentrated release of industry risks.
But the future prospects of PPP are worthy of recognition.
He once said that the global economic volatility has intensified and the downward pressure on the domestic economy has increased, especially under the background of increasingly prominent local hidden debt risks and fiscal risks. Steadily promoting the development of the PPP industry is an inevitable choice for my country to effectively respond to various risks and challenges.
How to make steady progress?
Zhang Pan’s understanding is that to do a good job in a PPP project, it is necessary to emphasize that the underlying logic of the investment project must conform to the original intention of the PPP, and the procedures must be rigorous and compliant, and “to be able to stand the test of time”.
(Economic Observer reporter Du Tao also contributed to this article)
China Youth Daily · China Youth Daily reporter Zhang Junbin Source: China Youth Daily