The latest official data points to the scrapping of a sizeable number of public-private partnerships (PPP) in China following a nationwide crackdown on the sector by the central government.
PPP’s have seen roaring growth in China over the past four years, with the number of PPP projects surging from zero to over 7000, representing a total investment sum of more than 11 trillion yuan.
The surging growth of the PPP sector has raised concerns about attendant risk amongst China’s central government regulators, particularly with regard to their use by local governments to covertly increase debt.
In November last year the Ministry of Finance issued the “Notice Concerning Standardisation of Public-Private Partnership Integrated Information Platform Project Library Management” (关于规范政府和社会资本合作（PPP）综合信息平台项目库管理的通知) (Circular No. 92), which mandated a “clean-up” of the PPP project library by local governments by the end of March 2018.
The latest data released by MOF’s PPP Center indicates that during the period from December 2017 to March 2017 the Integrated Information Platform has seen the removal of 1160 projects from the project library, for a reduction in the total investment sum of 1.2 trillion yuan.
Approximately 14% of all PPP projects in the MOF Integration Information Platform have been withdrawn, representing an investment sum of nearly 500 billion yuan, or almost 10% of the total.
This figure does not include PPP demonstration projects that are scheduled for removal.
According to domestic experts the removal of over 1 trillion yuan in PPP projects is significant of MOF’s determination to clean up the sector, standardise PPP development and effectively prevent the use of PPP as a new financing platform that will foster covert debt growth amongst local governments.
Data from the China PPP Center indicates that Xinjiang, Shandong and Inner Mongolia are the three-province level entities which have seen the largest number of PPP’s removed, at 222, 206 and 152 projects respectively, worth 159.6 billion yuan, 149.1 billion yuan and 144.1 billion yuan.
These projects account or 50% of all PPP removals, as well as 37.1% of cancelled investment value.
In some cases projects were removed because of adjustments to financing methods. For example the 500 million yuan Tianyi Lake Ecological Integrated Management PPP project, situated in the Daiyue district of Tai’an city of Shandong province, dropped the PPP model once project financing was in place, and was consequently withdrawn from the project library.
The 420 million yuan 3D Integrated Traffic Hub and Integrated Tourism Road PPP project in Inner Mongolia’s Baotou city was also removed from the library due to adjustments to the implementation plan, which meant it no longer adopted the PPP model.
Official data indicates that amongst the removed projects 400 involved municipal infrastructure (350.5 billion yuan), 129 involved transportation (356.8 billion yuan), and 72 pertained to integrated urban development (118.7 billion yuan), accounting for 51.9% of all withdrawn projects and 67.6% of withdrawn investment.
MOF has also said that it has ordered province-level finance departments to make adjustments another 89 PPP projects worth 481.8 billion yuan of investment by the end of June, for reasons including lack of standardised operation, poor procurement processes, and defects with signatory entities.
In the case of failure to satisfy relevant requirements after June, these projects will be withdrawn from either the demonstration project list or the project library.