Private Investment in Local Municipal Construction Projects Analysed by China's Economy & Policy-Gateway International Group20 Feb 2012 • by Natalie Aster
Since Several Opinions on Encouraging and Guiding the Healthy Development of Investments from the Private Sector was issued in May 2010 by the State Council, corresponding measures have been introduced throughout the country, and measures designed to make full use of private investment have become a core concern at all levels of government. However, restricted by many factors, the progress of this reform is still relatively slow.
At the current time, due to the special nature of the industry, the participation of private capital is limited in local municipal construction in China; there is very little space for private investment and development. Combining successful domestic practices along with foreign experience, it can be seen that the following models are worth consideration with respect to encouraging the participation of private investment in municipal construction projects.
According to the report “Introducing Private Investment in Local Municipal Construction Projects” by China's Economy & Policy-Gateway International Group, the BOT Model refers to the Build-Operate-Transfer Model, which is popular in China, and is also known as the “franchise financing” model. Specifically, it means private organizations participate in national public infrastructure projects, and form a partnership with government agencies, so it is a financing model designed to allocate the resources, risks and benefits of the project based on mutual profit.