China: British Embassy’s prosperity fund supports PPP
Published 21 October 2014
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This article is no longer current. Please refer to Overseas Business Risk - China
Summary
A series of high-profile measures were introduced at the end of September to support public-private partnerships in China, including institutional changes and the introduction of an ambitious programme of pilot projects at the local level. Infrastructure UK and the British Embassy have been working closely with relevant Chinese departments to influence policy development. Momentum is strong, with further visits, workshops and the production of policy papers all planned before the end of the financial year. UK firms involved throughout.
Details
At the end of September China’s Ministry of Finance (MOF) issued ‘The Instruction on Promoting and Using the Model of Public-Private Partnership (PPP).’ In the same month, the Ministry announced a series of institutional changes to further support the development of PPP policy, including the establishment of a PPP Division within the Ministry of Finance, which will be overseen by Vice Minister Wang Bao’An.
| Province/Region | Project Number | Capex (RMB, billion) |
| Chongqing | 10 | 100 |
| Jiangsu | 15 | 87.5 |
| Anhui | 42 | 71 |
| Fujian | 122 | 224.7 |
In a related development, the MOF and the National Development and Reform Commission (NDRC - China’s planning ministry) have been rolling out a large number of PPP pilot projects in four provinces around China – see above table. The majority of these projects are infrastructure concessions, where the user pays rather than the government.
Rationale and support for PPP in China
The Chinese authorities see PPP as one means to meeting China’s vast urbanisation financing requirements and improving the quality of public services delivery. According to Jia Kang, a policy advisor in China who attended IUK training earlier this year, over the next two or three decades ongoing urbanisation will see a further 400 million people move from rural to urban areas, necessitating investment of more than RMB 40 trillion into infrastructure and public services.
Support for expanding the use of PPP in China comes from the highest levels, including Premier Li Keqiang and Finance Minister Lou Jiwei. Meanwhile, senior policy advisers see PPP development as a crucial element feeding into the comprehensive reform agenda, which can leverage the transformation of government functions, the reform of state-owned enterprises and the further development of the market economy.
What the UK is doing
Supported by the Prosperity Programme, for the past two years Infrastructure UK (IUK) and the Embassy have been working closely with the MOF and the NDRC as they have been developing their policies. IUK have hosted four senior Chinese delegations, the most recent of which was led by Jia Kang and coincided with the 6th UK-China Economic and Financial Dialogue, and have themselves undertaken two week-long trips to China. During their most recent visit to Anhui Province, IUK delivered a lecture on PPP to more than 100 local government officials.
There is growing evidence that our work is having direct influence over policy development in China. For example, a number of concepts and expressions that feature in the Ministry of Finance’s ‘Instructions’ document have been taken straight from IUK’s materials, including references in English to ‘Value for Money’ as the recommended appraisal model and the observation that ‘the risk should be allocated to the most appropriate party.’ The director in the newly established PPP Division has described the document as a product for the Chinese context, which learnt a lot from the UK experience. He told us that MOF would do business planning for 2015 shortly. They hoped they could secure some PPP study trips to the UK next year.
British financial and professional services firms, world leaders in developing PPP contracts, have been involved through-out our work, including by delivering via the China Britain Business Council a series of two day workshops in Beijing and Shanghai this year and Changchun, Harbin and Chengdu next year. This has afforded them direct access to Chinese policy-makers and, it is hoped, an advantage over other foreign companies in accessing contracts.
UK experts are now preparing a set of policy papers covering the overall enabling environment, establishing a PPP unit, contract standardisation and risk allocation, all issues raised by our Chinese contacts during previous discussions. This December and next March, the IUK experts will visit China again, to share the findings and recommendations with the key policy makers at the central and regional levels. It is hoped that the final papers will be ready by March, to be presented at the highest levels to leaders of the State Council, Ministry of Finance and NDRC.
Disclaimer
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