Fitch: Public-private partnership to improve infrastructure in China
There were 1,043 potential PPP projects valued at a total of 2 trillion yuan (314 billion U.S. dollars) announced by the National Development and Reform Commission (NDRC) in May this year. In September, the Ministry of Finance initiated a fund with 180 billion yuan to support PPP projects.
The PPP model facilitates cooperation between the government and enterprises in using social capital for projects, such as water conservation, transportation and environmental protection, said the report.
If the PPP projects are fenced off from the construction company's other operations, the debt raised under the project is off the balance sheet, which means it will not increase the company's leverage. This will reduce the capital requirements and financing expense for construction companies, it said.
The report also noted that construction companies could face higher risks when PPP projects fail. ■