Increased transparency in China’s PPPs, says Moody’s

China’s PPP programme is making steady progress with strong growth in the country’s project pipeline and increased regulatory transparency for private sector investors, according to a fresh report by rating agency Moody’s.

Over the past few months, the Chinese government initiated several measures which aimed to help increase transparency throughout the development process as well as in long-term financing instruments in a bid to attract players from non-state-owned enterprises. The introduction of drafted PPP regulations is a positive development for the programme’s regulatory framework, said the report.

Beijing also encouraged the issuance of PPP special-purpose bonds to diversify financing channels in the country to fund construction and development of new projects, while also enhancing transparency for PPP-backed

securitisations. The first listings of PPP projects have been completed on both the Shanghai and the Shenzhen Stock Exchanges in the first half of this year, raising a total of 2.7 billion yuan ($407 million; €346 million).

In July, the National Development and Reform Commission issued a notice to regional and local governments to take advantage of a PPP-like model to monetise existing infrastructure projects through various forms of structures such as TOT or entrusted management and shareholding co-operations.

“Support from the central government has resulted in positive regulatory developments in China’s PPP framework, thereby enhancing the financing options available to PPP developers and investors,” commented Osbert Tang, a vice-president and senior analyst at Moody’s.

He added that the improved regulatory transparency and availability of longer-term financing provide greater clarity to private sector investors. However, SOEs remain key players in the PPP market.

The rating agency also quoted figures from the national database, which have indicated a strong growth in the first half of 2017. The worth of PPP projects in the database grew by 2.9 trillion yuan, or 21.5 percent from the end of December 2016 to the end of June this year. More projects have advanced through their development cycle, with 20 percent of all PPP projects reaching implementation stage, Moody’s noted.