Concerns and solutions in the post-PPP era

By Wang Jihong and Liu Ying, Zhong Lun Law Firm
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China sees remarkable progress in its public-private partnership (PPP) mechanism now since its fast growth in the past four years. Both the number and total investment of PPPs show leapfrog growth. As at the end of 14 December 2017, 424 PPPs with a combined investment of RMB18.2 trillion (US$2.87 trillion) were entered into the integrated data platform of the Ministry of Finance (MOF).

王霁虹 WANG JIHONG 中伦律师事务所合伙人 Partner Zhong Lun Law Firm
王霁虹
WANG JIHONG
中伦律师事务所合伙人
Partner
Zhong Lun Law Firm

Although the MOF’s data of government indebtedness do not include payables under government-funded PPPs, the ministry is vigilant about the concerns and risks of local government insolvency as they are incurring substantially more debt to accommodate the explosive growth of PPPs. It issued a circular No.92 just in time, which requires a thorough review of all projects recorded in PPP libraries and imposes more stringent conditions for including new PPPs into the libraries.

State-owned enterprises (SOEs), the key players in PPPs, are raising their debt/asset ratios to new levels. The State-owned Assets Supervision and Administration Commission (SASAC) is acutely aware of the tremendous pressure and danger that the elevated ratios may pose to SOEs in the future. Following in the footsteps of the MOF, the SASAC released circular No. 192 in November 2017, imposing rigorous requirements on the PPP risk controls of central enterprises.

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Wang Jihong is a partner and Liu Ying is an associate at Zhong Lun Law Firm

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