Although corporate bonds based on PPP (public-private partnership) projects are still at a research stage, financial institutions have accelerated investment in this field which is expected to reach one trillion yuan. It is learnt from a number of rating agencies and underwriters on Dec. 13 that these companies are pushing ahead with studies of relevant matters.
“As soon as we’ve learnt last Monday that the regulator is mulling over issuance of corporate bonds for PPP projects, we organized a seminar. Based on current conditions, these bonds are very likely to be revenue bonds,” an employee of a financial institution told the Economic Information Daily on Dec. 14. Even although they will adopt revenue bonds, a great number of supportive policies are needed. For example, its issuance and access system should change. There will also be supportive measures in the duration of bonds. For example, the rating system should not copy that for urban investment bonds. New rating rules should be established.
At the second China PPP Financing Forum as early as August, Wang Ping, vice general manager of China Central Depository & Clearing Co., Ltd. (CCDC), disclosed that “as of the end of June, the total investment in projects put into database on the national PPP comprehensive information platform has reached 10.6 trillion yuan. If 40 percent of the investment is funded by bonds, these projects will need issue over 4 trillion yuan bonds.”
In Wang’s view, currently, the government should let financial institutions participate in the earlier design of PPP projects to improve financing arrangements with different life cycles and provide choices for PPP investment to withdraw. Wu Yaping, head of the system policy department of the NDRC Investment Research Institute, believed that reasonable investment returns from PPP projects is an important criterion for social capital to make investment decisions and governments to make financing policies. Wu suggested that the NDRC should work with other authorities to establish benchmark yield for PPP projects. “For PPP projects that require payment from users, the reasonable rate of investment return could be set around 7-8 percent. For projects requiring payment from governments, the reasonable rate of investment return could be set around 5-6 percent,” Wu said.
Translated by Coral Zhong
Latest comments