China Cabinet Says To Boost Urban Infrastructure Investment
China will step-up urban infrastructure investment and allow private capital to provide public services to boost investment and consumption, the State Council said Wednesday.Better profit opportunities can be had in the private sector. Most likely it will be foreigners coming in to play the role of sucker.
The Cabinet said in a statement following a meeting chaired by Premier Li Keqiang that urban infrastructure investment will focus on water, railway, power grid, gas and heat supplies.
It says the government will reform financing mechanism and attract private capital to participate in construction and operation of public services.
Urban investment and railway are probably the only two sectors will receive government funding support as Beijing refused to go back to the old stimulus package despite the growth is slowing.
From a Chinese article giving more detail:
Fair for the first time officially released the new government in Beijing "the introduction of social capital to promote the field of municipal infrastructure construction pilot project implementation plan." Program clearly, Beijing will actively attract social capital to promote rail transport, urban roads, integrated transport hub, sewage treatment, solid waste disposal, the town building heating and other six areas, and with the pilot program launched 126 projects with a total investment 338 billion yuan, 130 billion yuan of social capital to be introduced.The Chinese word "social capital' initially made me think they will raid the state pension funds. Unlike Social Security in the United States, which taxes workers and uses the money to pay current retirees, Chinese social security actually invests workers' contributions. However, it does appear they're talking about allowing private capital in. The question again is, who is going to invest?
Beijing to fund infrastructure construction with private capital
The introduction of private capital is a breakthrough in deepening reform and speeding up the transformation of government functions, Yang said.It may all look good on paper, but you can be sure that if there's economic trouble down the line, the government is not going to hike sewer or road fees to pay back investors. They will keep prices low to keep the public happy, as they have already done. Private equity investment solves the problem of defaulting on debt, but for the investor the difference may be negligible in cases that are not outright defaults.
The government will grant private investors a reasonable return through a series of measures, including investment, service purchases and financial subsidies, he said.
"The policy sends a positive signal," said Wen Yibo, chairman of Sound Group, a private water and waste treatment company. "It will benefit both the public and the industry."