Social capital scope narrowed, PPP operation guide issued countdown

category:Finance
 Social capital scope narrowed, PPP operation guide issued countdown


According to the economic observer, the new PPP operation guidelines are in the process and may be issued within the year, while the value for money and financial affordability guidelines are unlikely to be issued within the year.

This news has been confirmed by a number of PPP market participants, and a market person told reporters that the regulation that enterprises whose governments at the same level as actual controllers cannot participate in PPP business as social capital has been retained.

In November 2019, the general office of the Ministry of Finance issued a letter to solicit opinions on the revised version of the operational guidelines for the mode of cooperation between government and social capital, and proposed in the general provisions that enterprises with the government at the same level as the actual controller cannot participate in PPP projects at the same level as social capital. This also means that government financing platform and state-owned enterprises at the same level may no longer participate in PPP as social capital.

On October 16, a PPP practitioner told the economic observer that PPP is still promoting its implementation in the market, and it is a mode more suitable for the current situation of China. However, due to the expiration of the policy guidelines, people always feel that they are lack of confidence in promoting the project. And if the operation guide has not been out, there is no positive driving force for the development of the industry. In order to develop the current industry, not only the operation guide should be issued, but also the new value for money evaluation guidance document and the financial affordability demonstration document should be issued in a timely manner.

Document revision

Recently, a number of provincial governments have issued policies to promote the development of PPP. Some market participants believe that the PPP market is recovering, and even has the trend of making a comeback. During the interview, the reporter found that PPP did not grow significantly in the first half of 2020. Compared with the same period last year, affected by the epidemic situation, the growth rate of projects and investment is still declining.

According to the report of PPP center of Ministry of finance, 9746 projects have been put into storage and 15.1 trillion yuan of investment have been put into storage since 2014; 6708 signed projects with investment of 10.6 trillion yuan, with a landing rate of 68.8%; 4032 construction projects have been started in total, with an investment of 6.1 trillion yuan, with an commencement rate of 60.1%.

Since the beginning of this year, 684 new projects with an investment of 1250.4 billion yuan were newly put into storage, with a year-on-year decrease of 174.8 billion yuan or 12.3%; 306 net warehousing projects and 724.6 billion yuan of investment decreased by 4.9 billion yuan or 0.7%; 378 signed projects and 752.8 billion yuan of investment were signed, with a year-on-year decrease of 1146.3 billion yuan or 60.4%; 324 construction projects and 518.8 billion yuan were started, with a year-on-year decrease of 1622.7 billion yuan 8%.

Guidelines for value for money evaluation of PPP (Trial), guidelines for the demonstration of financial affordability of government and social capital cooperation projects and guidelines for the operation of government and social capital cooperation mode (Trial) are known as the three pillar documents of PPP finance, but they were invalid for more than one year last year.

On February 13, 2019, the Ministry of Finance issued the order No. 103 of the Ministry of finance of the peoples Republic of China - decision of the Ministry of Finance on Promulgating the catalogue of abolished and invalid financial regulations and normative documents (the 13th batch) (hereinafter referred to as the catalogue). In the list of invalid financial normative documents, the three major documents of the Ministry of Finance on PPP are listed, namely, the evaluation of value for money of PPP The notice of the guidelines (Trial Implementation), the notice on printing and distributing the guidelines for the demonstration of financial affordability of government and social capital cooperation projects, and the notice on printing and distributing the operation guide of government and social capital cooperation mode (Trial Implementation).

Among them, the government and social capital cooperation mode operation guide (Trial) was issued on November 29, 2014.

On November 1, 2019, the Ministry of Finance issued a letter from the general office of the Ministry of Finance on Soliciting Opinions on the operational guidelines for the cooperation mode between government and social capital (Revised Version) to local financial departments.

For the revision, Liu Qianzhi also put forward his own opinions. He believes that the operational guidelines should define the main participants of PPP projects. First, the Development Zone Management Committee and the town directly under the jurisdiction of the city should be added as government sponsored units. Second, expand the scope of social capital. The regulation that state-owned enterprises controlled by the government at the same level shall not be allowed to participate in PPP projects at the same level as social capital shall be cancelled. The financing platforms (and their holding companies) at the same level can also participate in PPP projects after being transformed into independent legal persons and decoupled from the government, so as to increase support for private enterprises and foreign-funded enterprises to participate in PPP projects. The third is to clarify the scope of implementation agencies. The Financial Bureau, SASAC and other government agencies, hospitals, schools and other institutions can be used as implementing agencies, with a shareholding ratio of no more than 20%.

Liu Qianzhi believes that the operation guide should also ensure the stability of the project company. First, social capital shall not transfer the equity of the project company during the construction period in principle. Second, the intervention of financial institutions requires the consent of the government at the same level. Third, during the temporary takeover period and the early termination transition period, the government has the responsibility to ensure the normal operation of PPP projects.

In November 2019, one article in the letter of the general office of the Ministry of Finance on Soliciting Opinions on the operation guide for the mode of cooperation between government and social capital (Revised Version) states in the general provisions that enterprises with the government at the same level as the actual controller cannot participate in PPP projects at the same level as social capital. This also means that government financing platform and state-owned enterprises at the same level may no longer participate in PPP as social capital.

According to the above-mentioned industry personage, the clause that state-owned enterprises at the same level shall not be regarded as social capital side has a great impact on the implementation of county-level projects. At present, most of the state-owned enterprises and state-owned enterprises only enter the top 100 counties or have clear control line requirements for the countys financial revenue at the mid year meeting. If they fail to meet the requirements, they cannot pass the investment evaluation committee. Therefore, county projects, except for some PPP projects of franchise type and strategic significance of Yangtze River Ecological Protection and yellow river ecological protection, are difficult to attract central enterprises, state-owned enterprises and listed companies. Therefore, once this article is implemented in the draft, some county-level projects will be stagnated for at least 3-6 months, and the market needs a period of acceptance and feedback.

According to the data from the national development and Reform Commission, in April 2020, the national development and Reform Commission added the content of private enterprise participation in the national PPP project information monitoring service platform which has been released to the public. Up to now, there are 1645 private investment projects signed by the platform, accounting for 44%. Among them, there are 803 projects won by private enterprises and 842 projects controlled by private enterprises in joint ventures.

According to the data, in terms of industries, the top five private enterprises participate in PPP projects are 645 urban infrastructure, 208 environmental protection projects, 205 social undertakings, 177 agriculture, forestry and water conservancy projects and 124 transportation projects, accounting for more than 80% of the total. In terms of regions, the top five places for private enterprises to participate in PPP projects are 224 in Shandong, 156 in Anhui, 119 in Jiangsu, 105 in Henan and 84 in Guangdong. According to the above-mentioned industry insiders, judging from the winning information of PPP projects in 2020, many county-level PPP projects in the central and western regions will eventually cost the state-owned enterprises at the same level, and then the policy banks will give loans. Of course, this mode is definitely against the original intention of PPP. However, affected by the epidemic situation, under the pressure of the Three Guarantees, the county-level government has little choice but to survive in the policy cracks. Source: Guo Chenqi, editor in charge of the Economic Observer_ NBJ9931

According to the data, in terms of industries, the top five private enterprises participate in PPP projects are 645 urban infrastructure, 208 environmental protection projects, 205 social undertakings, 177 agriculture, forestry and water conservancy projects and 124 transportation projects, accounting for more than 80% of the total. In terms of regions, the top five places for private enterprises to participate in PPP projects are 224 in Shandong, 156 in Anhui, 119 in Jiangsu, 105 in Henan and 84 in Guangdong.

According to the above-mentioned industry insiders, judging from the winning information of PPP projects in 2020, many county-level PPP projects in the central and western regions will eventually cost the state-owned enterprises at the same level, and then the policy banks will give loans. Of course, this mode is definitely against the original intention of PPP. However, affected by the epidemic situation, under the pressure of the Three Guarantees, the county-level government has little choice but to survive in the policy cracks.