An examination of China’s PPP legal practice in 2015

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The current public–private partnership (PPP) tide in China driven by the Ministry of Finance (MOF) and the National Development and Reform Commission witnesses the transformation and upgrading of large state-owned enterprises (SOEs). These enterprises, which have traditionally only been familiar with bid invitation, bid submission and construction, have started to have an impact on numerous new areas such as project proposal and planning, company establishment and acquisition, fund establishment and operation, etc. Certain SOEs that got their starts fairly early have cultivated teams with extensive experience in investing, and certain enterprises that are just starting up are selecting young talent from various entities in an all-out effort to catch up. Private enterprises also participate enthusiastically.

Under the guidance of “One Belt, One Road” Initiative, numerous enterprises have extended their PPP project antennas beyond China’s borders. Fortunately, a major change in business philosophies has occurred, where enterprises start to rely on lawyers, accountants and other professional advisors to innovate investment and financing models. Following on their heels are the large banks and insurance, fund, trust and other such financial institutions that are directly or indirectly participating in PPP projects through equity investment plans, independently or jointly establishing funds, and other such means.

However, the current project risk identification and prevention standards of these enterprises and financial institutions will be subjected to the test of reality within the next five to 10 years and, unavoidably, a number of them will be hit by such risks as difficulty in payment of government service fees or underperforming projects, resulting in their being sidelined.

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Wang Jihong is a partner of Zhong Lun Law Firm in Beijing. She can be contacted on +86 10 5957 2063 or by email at wangjihong@zhonglun.com