China issues guideline for new public-private partnership mechanism

The National Development and Reform Commission (NDRC), China's top economic planner, and the Ministry of Finance on Wednesday released a guideline for the new cooperation mechanism between government agencies and social capital, aiming to further deepen the reform of the infrastructure investment and financing system while effectively stimulating the vitality of private investment. It comes after implementing the public-private partnership (PPP) for nearly 10 years.

A total of 18 measures under four aspects are included in the guideline. The guideline vowed to fully utilize market mechanisms and broaden the space for private investment, while resolutely curbing the new hidden debt of local governments and improve the construction and operation of infrastructure and public utility projects.

The guideline noted that the PPP projects should focus on user-pay projects with clear charging channels and methods, while the project operating revenues should cover construction and operating costs without adding additional liability for future fiscal expenditures.

It also noted that the focus should be on key projects such as infrastructure construction projects for transportation, while prioritizing the participation of private enterprises.

The issuance of the guideline pointed out a clear direction for better utilizing social capital especially targeting key industries and aspects such as investment, Wang Peng, associate researcher at the Beijing Academy of Social Sciences, told the Global Times on Wednesday.

Wang added that the issuance of the guideline shows that China has the ability to guide and encourage the development of the private economy, which will also motivate private enterprises to participate in the construction and operation of relevant projects as the companies will be able to benefit from the participation as well.

Chinese authorities have been implementing a slew of measures to bolster the development of the private sector with noticeable results already seen.

For instance, the China Small and Medium Enterprise Development Index saw a further increase of 0.2 points in the third quarter, hitting 89.2, after experiencing a decline of 0.3 points in the second quarter.