More Detail on Investors Fleeing PPP Projects

Last month: Why Did Private Investment Collapse? Private Investors Fled Public Projects

SCMP today: Investors grow shy of China’s public-private projects

The value of contracted projects reached nearly 1 trillion yuan (HK$1.18 trillion) in the second half of last year, but in the first quarter this year, the contracted projects were valued at just 300 billion yuan, according to a research report by Minsheng Securities analyst Zhu Zhenxin.

In its latest move, the finance ministry and the National Development and Reform Commission issued a note on May 30 urging an “orderly” development of PPP through seven approaches including media promotion and enhanced regulation.

“There is a key issue unsolved. That is how to protect the private investors when local governments change their original plans,” Lu Zhengwei, Beijing-based chief economist at Industrial Bank said.

When a company invests in a bridge-building project by a local government, the two parties may agree that the city only needs one bridge. Ten years later, when there is growth in car ownership, the government decides to build another bridge. At that time the company can do nothing but see its income from bridge toll slide, Lu said.