PPP in China: long way to go

I think I can say I have been a pioneer in Beijing trying to launch the Olympic projects under a PPP scheme (Public Private Partnership). After studying how other countries successfully used PPP, I launched the big tenders (Bird’s Nest and others) under a PPP approach. While the Prequalification was a real success we were then hit with the lawyers who said we could not follow the PPP because of the new tendering laws. So, PPP was dead, virtually, and we tried to carry out the projects in a “creative” way. Some lawyers tried to convince me “China has PPP” but our discussion lasted 1 minute only, after I asked one question; the only real PPP project ever in China was the power plant Laibin B.

Recently China officially launched a series of “PPP projects”. While I do not agree with the approach and the format is not really PPP, it seemed like a nice try.
Well, the results are not good.

“UPDATE 1-China says to further pave way for private investors in infrastructure projects”
Reuters article

So far, fewer than one-quarter of projects announced by the government as PPPs have found private investors, official data shows.
Investors had signed up for 619 of 2,531 projects with a total value of 1 trillion yuan through the end of July 2016 according to the NDRC.

Reuters also pointed out in another article that the government trying to woo private capital has been a flop. Since March 2015 the NDRC has raised more than half of its target of 3.5 trillion RMB for PPP projects for bridges, roads, schools, hospitals. But over 90% comes from SOE according to a study by North Square Blue Oak. A real embarrassment for the government as it failed to attract the right private investors and SOE have been finding ways to monopolize the funding.

See also: “China’s private infrastructure firms face unexpected competition”
Yahoo Finance article

Some statements say it all:
“The government is willing to work with government firms, but co-operation with private companies is a shambles. None of the projects make financial sense.”

My experience showed most government officials (and not only in China) do not understand at all what is PPP. Explains why many projects fail as private companies do not see an interest.
As a former long-time chair of the European Chamber’s Working Group on Public procurement I kept a watch on PPP in China.


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