Hong Kong, March 15, 2017 -- Moody's Investors Service says that the Chinese government's
(Aa3 negative) strong commitment to public-private partnerships
(PPPs) as an alternative means to develop and fund regional and local
government (RLG) infrastructure projects is supporting the sector's
medium- to long-term growth prospects.
"China's PPP market is still in the early emerging stage,
due to its evolving framework and the dominance of state-owned
enterprises (SOEs) rather than private sector developers and investors,"
says Ivy Poon, a Moody's Assistant Vice President and Analyst.
"The government has since 2015 introduced numerous directives and
measures that provide more clarity and guidance on the PPP framework,
which will support the market's development and likely lead to more
third-party private investment," adds Poon.
Poon was speaking on the release of a Moody's report entitled "Infrastructure
and Project Finance -- China: Public-Private Partnerships:
Government Support Provides Strong Growth Potential".
Moody's report points out that in China, PPPs are primarily
seen as a means of broadening the financing options available to RLGs
for infrastructure development.
The country's announced PPP project pipeline continued to grow in
2016, with 11,260 projects with a total investment of RMB13.5
trillion at various stages of development at end-2016, compared
to 6,997 projects with a total investment of RMB8.1 trillion
at the start of 2016.
Despite this large announced pipeline, third-party private
sector participation remains limited. In contrast to more developed
markets such as Australia, the UK, Canada and the US,
PPP involvement is characterized by SOEs.
But, similar to the more mature PPP markets, the Chinese government
is also interested in PPPs because they allow governments to transfer
risks to the private sector at a fixed price that can accelerate project
delivery, lower total project costs, and improve cost certainty
for the public sector offtaker on a whole of asset life basis.
The legal and contractual framework for PPPs in China is evolving.
As such, Moody's views the government's efforts to improve
the transparency of the PPP model while also increasing new investment
instruments to support PPP projects are positive for the market's
development.
Moody's further expects RLGs to remain supportive of PPPs as a means
to reduce their immediate fiscal burden for infrastructure development.
In general, PPPs are likely to be mostly utilized in regions where
funding requirements for infrastructure projects are sizeable, but
RLGs' financial resources are limited.
Subscribers can access the report at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1059454
The report may also be found through Moody's topic page "China's
Trilemma: Growth, Reform and Stability", available
at http://www.moodys.com/chinarebalancing.
This page provides a centralized source for Moody's research related to
key credit issues in China as the country's macroeconomic story continues
to unfold.
Recent Moody's publications relating to China's Trilemma include:
• Insurance -- China: Universal Life Product Sales Have
Peaked, But Credit Impact Will Linger
• China Credit: Sustained Capital Outflows Constrain Policy
and Pressure the Currency, but Companies Largely Resilient
• Markets -- China: Onshore Bond Inclusion in Global Indices
Is Positive for China's Interbank Market
• Banks -- China: Mid- and Small-Sized Banks'
Higher NCD Levels Pressure Profitability, Widen Funding Mismatches
• Auto ABS -- China: Delinquencies Will Remain Low Through
2017 After Declining in Q4 2016
• China's Coordinated Approach to Regulating Investment Products
Would Be Credit Positive for Banks
• Default Report: Default Rate for Asian Non-Financial
Corporates Expected to Remain Low in 2017
• Coal -- China: Government Measures Will Drive Coal Prices
Lower but Strong Enough to Support Miners' Credit Profiles
• Rated High-Yield Non-Financial Companies --
China: Most Companies Could Manage 10% Renminbi Depreciation
vs US Dollar in 2017
• Securitization -- China: Sector Update -- Q4 2016:
Auto ABS and RMBS Performing Well as Issuance Grows
NOTE TO JOURNALISTS ONLY: For more information, please call
one of our global press information hotlines: New York +1-212-553-0376,
London +44-20-7772-5456, Tokyo +813-5408-4110,
Hong Kong +852-3758-1350, Sydney +61-2-9270-8141,
Mexico City 001-888-779-5833, São Paulo
0800-891-2518, or Buenos Aires 0800-666-3506.
You can also email us at mediarelations@moodys.com or visit our
web site at www.moodys.com.
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Ivy Poon
Asst Vice President - Analyst
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077