The economic observer, du tao ppp (government and social capital), is becoming a tool for \"breaking the wall \"of private-sector capital, transforming private companies from labor and raw-material exporters to exporters of capital, especially in large infrastructure sectors such as railways, where China's first privately-owned hangzhou-shao-tai railway has adopted the PPP model.
It is not merely a change in the mode of investment and financing, but it is also expected to become a change in the way government governs, although the latter role has not been fully demonstrated.
Jin Yongxiang, chairman of Dayue Consulting, who has been doing PPP consulting business, believes that the current PPP has changed the survival of private enterprises, that is, now private enterprises can move to investment links to do business, because PPP has broken some barriers to investment in infrastructure and public services.
In December 2019, the \"Opinions of the CPC Central Committee and the State Council on creating a better development environment to support the reform and development of private enterprises\" was issued, in which the problems encountered by private enterprises in the past were all involved, and both the financing problems and the bidding threshold were clearly required.
Jin Yongxiang told reporters that PPP is conducive to private enterprises to break investment barriers. For example, after the railway was monopolized, private enterprises cannot participate, and now through PPP, private enterprises have more opportunities to invest in infrastructure and public services, and then more opportunities to build and operate, which provides opportunities for private enterprises to participate in public services and infrastructure investment.
On January 9,2020, Skyland Vice President of Ecology Zhang Wulong told Economic Observer that in the infrastructure and public service industries, private enterprises in both industries could enter, but could only do small, or even only participate in labor and building materials. Now, private companies can unite with big central companies. From the form of PPP is conducive to achieve this effect, but this is a gradual process, need to achieve from the accumulation of quantity to qualitative change. Private companies, beset by financial problems and experience in building large projects, can hardly participate in large projects and can now participate as shareholders.
In Mr Zhang's view, the PPP has changed the identity of private companies involved in large infrastructure and public service projects – from the export of labor and building materials to the investment of shareholders.
Zhang Wulong told reporters that private enterprises have specialized technology, can participate in the PPP project consortium, provide later maintenance, PPP does have the effect of breaking obstacles.
Zhang Wulong's cognition is recognized by the head of a subsidiary of a central enterprise, who told reporters that the strengths of many private enterprises are operating, especially in previous professional subdivision areas, such as environmental protection, and after promoting PPP, the opportunities for private enterprises to participate in investment in large projects have greatly increased.
In fact, there are also some PPP industry people think that private enterprises have been involved in some industries, such as sewage treatment, but Zhang Wulong believes that for some industries with higher profits, there have always been some barriers, and PPP is conducive to breaking these investment barriers.
The head of a private enterprise told the Economic Observer that what turned out to be total discrimination is now allowing private companies to participate. Before limited to participate in water, solid waste and other environmental projects, large watershed management, infrastructure projects are simply not to participate. Now through the PPP model, allowing private enterprises to enter the market, the amount of income, compared with the previous must be more. Especially for large-scale projects, private enterprises have the opportunity to participate as shareholders of social capital.
The Ministry of Finance's 895 landing demonstration projects include 456 exclusive social capital projects and 439 consortium projects, according to its PPP report data for 2018 released in January 2019. There are 1,589 contracted social capital companies, including 633 private,42 Hong Kong, Macao and Taiwan,18 foreign investors and 855 state-owned enterprises.
The heads of these private enterprises give examples of how to participate in the project together, first of all, state-owned enterprises or central enterprises to take the overall situation, that is, cake is distributed by central enterprises; second, the most important is financing, without the addition of central enterprises, state-owned enterprises, private enterprises with project financing is almost impossible. In particular, large-scale projects, because of various risk considerations, financial institutions are very unlikely to participate in private enterprise-based project financing.
The head of the above-mentioned central enterprises sub-subsidiaries also confirmed the authenticity of this sentence, he told reporters, after the participation of central enterprises, the realization of the project recessive credit, after all, if purely private enterprises, financing is a big problem, banks and other financial institutions need private listed companies or even bosses to guarantee.
The reporter also learned that in 2017, when a private enterprise operated the PPP project, a financial institution in Beijing called for a modification of the guarantee provided by the private enterprise, including both the company's real controller and husband and wife to guarantee, and also required the real controller to guarantee the company outside the system, that is to say, the other industries that the private enterprise has no actual connection with the real controller to guarantee.
At the time, the real controller thought the cost of the financial institution was slightly higher, and the person in charge of the company's financing told reporters that at the time, the cost of the borrower was low and the price of conscience. The price was probably the lowest cost financing for years to come, but it wasn't. So whether private enterprises participate in PPP, or do other projects to maintain development, reduce financing costs, need the credit of central enterprises or state-owned enterprises to increase. In order not to do so, central enterprises take minority shareholders, because the balance sheet will increase liabilities. Sometimes central enterprises as minority shareholders, but the project needs to let central enterprises lead, so construction profits are for central enterprises, private enterprises get very little. \"Private enterprises take what you should take, that is, the piece of capital matching. For example, the government out of 20%, private enterprises out of 40%, central enterprises out of 40%, private enterprises in the 40% range upside down. The rest are central-owned. For example, A project, there are 20 private enterprises to bid, generally will find familiar and cooperation with the central enterprises to cooperate, or the leadership of the designated central enterprises, determine the overall situation of the central enterprises, the next to \"divide meat \", this time private enterprises and central enterprises to discuss in detail.
The person in charge of the above-mentioned private enterprises told reporters that in general, the meaning of central enterprises is that he decides, when financing requires private companies head office or listed companies to provide guarantees, central enterprises cannot provide guarantees to provide. At the time of construction, the central enterprises distribute according to their previous interests. In fact, the central enterprises let private enterprises in may be because of a lack of experience, but central enterprises want to all aspects of the decision. Then the conflict appeared and the quarrel began. Project allocation, financing credit enhancement guarantee, project progress is the focus. \"In fact, a lot of things, in private all through, for the management of both sides, is the distribution of benefits, ABC has long been arranged. But we need to go through the process, and that's the beginning of the fight. In the eyes of the above-mentioned heads of private enterprises, quarrels more or less will affect the pattern of distribution, but not the big distribution. After all, projects have to be done, or else they have to default. But the central enterprise has a problem is to negotiate a wave of people, work is a wave of people, behind the management of a wave of people. For private enterprises is a headache, but this is an institutional issue, the two different corporate culture, this time the need for the government to enter the field to coordinate the conflict of interests between the two sides.
The head of the above-mentioned private enterprises also admitted that although there are a variety of problems, but through the PPP, private enterprises to participate in infrastructure and public services investment opportunities have greatly increased.
In fact, PPP only provides a possibility for private enterprises to participate in large projects, in reality, even if there is the existence of PPP, the participation of private enterprises is not a smooth way.
In March 2019, the Ministry of Finance issued the \"Opinions on Implementing the Development of Government-Social Capital Cooperation Standard \", which proposed to increase support for private enterprises and foreign-funded enterprises to participate in PPP projects, recommend high-quality projects with good government credit and stable project income to private enterprises, and give preferential support to private enterprises to participate in projects under the same conditions. The central financial public service related special transfer payment funds priority to support eligible private enterprises to participate in the PPP project. In carrying out PPP projects, all localities shall not establish discriminatory clauses or additional conditions for the participation of foreign-funded enterprises or branches outside China.
However, it is undeniable that private enterprises can only participate in PPP fields such as sewage treatment and garbage disposal for various reasons. For large-scale projects, although the higher-level government has repeatedly issued papers to encourage private enterprises to participate more in the work of PPP, private enterprises have a disadvantage in comparing the size of assets, financing conditions and other aspects of state-owned enterprises, which makes private enterprises in participating in local PPP projects (especially in key municipal, transportation and other fields) is not smooth.
Kim believes that many people in the circle have been discussing the above two events in 2019 on different occasions in recent times. Some argue that private companies are hurting by the irregular entry of central companies into the market, while others argue that there have been too many PPP opportunities offered by the government in previous years and that they have been supported by shoddy projects. In fact, in addition to the private sector's own reasons, the 2018 PPP gate too fast too fierce closure is the important reason. Two years ago, the PPP was mistaken for a recessive debt by some people and its development was restricted. The government introduced a special debt to prevent the hidden debt, but recently the problem of the special debt began to appear, and the \"general debt\" of the special debt made it possible to become a \"hidden debt \". People have realized that the PPP project was no worse than the special debt, the real role of the special debt cannot be separated from the PPP. Assuming that PPP's doors weren't so fast and tight, it would have been a lot better for the economy today if it had given a little bit of debt to it and kept it thriving.
But before that, some private enterprises in the PPP industry faced the difficulty of financing, especially the environmental protection industry, PPP is too much or what problem? This is the industry's policy people are arguing, mr. kim believes that in recent years, private companies have seen ppp opportunities come, overloaded, but the door suddenly closed, resulting in the bank's radical reaction to break the chain of private enterprise funds, the consequences no one wants to see.
"But see the positive role of the PPP, especially in advancing market reform.” It may not be a perfect policy, but PPP is a huge step forward compared to previous land finance and government platform financing. And these also bring new investment opportunities for private companies to enter the field of infrastructure and public services," Mr Kim said.
In the past, some industries were regional monopolies or industry monopolies, such as railways, and some were done only by local companies. Open is the market, the market is competitive, compared to the previous, private enterprises have the opportunity to compete.