China public-private investment initiative showing progress, says Moody's

China's public-private partnership (PPP) programme is making "steady progress", Moody's Investors Service said in a new report, as central government support has led to an improved regulatory environment and more options for financing.
Beijing has promoted the PPP model, which channels private money into public infrastructure projects, as it looks to ease the burden on local governments reeling under heavy debt while maintaining growth in capital investment.
The value of PPP projects in a national database increased 21.5 percent from the end of 2016 to the end of June to 2.9 trillion yuan, while a greater portion entered the implementation phase, Moody's said.
"Support from the central government has resulted in positive regulatory developments in China's public private partnership (PPP) framework, thereby enhancing the financing options available to PPP developers and investors", said Moody's Vice President and Senior Analyst Osbert Tang.
"Regulations that increase transparency and improve investor protections are positive for the ongoing development of the PPP sector."
Uptake of the programme had been slow through last year, with many private firms saying projects offer poor returns, while complaining that state-owned enterprises (SOEs) crowd them out from the more attractive projects.
Moody's said that just over one-third of 700 "demonstration" projects were being developed by private groups in the first half of 2017, with the ratio relatively stable, indicating state firms still dominate.
As the total number of projects grows, the ratio of those moving to the implementation stage has also increased, Moody's said, a sign that the PPP model is seeing greater uptake.
Through the end of June, 20 percent of projects, or 1,345 projects, in the national database had reached implementation stage, up from 17 percent at the end of 2016, Moody's said.
Other positive developments this year include new efforts by the central government to increase financial channels for PPP projects such as special purpose bonds and securitisation are positive, Moody's said.