Ge Feng: PPP securitization is conducive to standardizing the relationship between government and enterprises

China Economic Weekly WeChat: ChinaEconomicWeekly

China Economic Weekly official website: Economic Network www.ceweekly.cn

Ge Feng, special commentator of China Economic Weekly

The National Development and Reform Commission and the China Securities Regulatory Commission recently jointly issued the Notice on Promoting asset securitization of government-private partnership (PPP) projects in the traditional infrastructure sector, proposing to give priority to PPP projects that are in line with the national development strategy and whose main social capital participants are leading enterprises in the industry to carry out asset securitization.

Vigorously promoting the PPP model is one of the important starting points for stabilizing growth, adjusting the structure, and promoting reform under the normal economic situation, and asset securitization work is one of the feasible solutions to solve the problem of PPP "landing difficulties". From the perspective of technical analysis, this work can effectively break through the main obstacles between PPP projects and social capital, and is a concrete embodiment of financial innovation serving the development of the real economy.

PPP projects (especially infrastructure PPP projects) usually have relative advantages such as clear returns and stable cash flow, while private capital should have a high willingness and ability to invest in such projects in the context of "asset shortage". But this is not the case. The obstacle between the two is mainly that the investment cycle of PPP projects is too long (generally up to 10 to 30 years), so in the absence of an effective exit mechanism, one party's "waiting to be fed" for funds and the other party's "waiting to be fed" for high-quality investment projects cannot achieve large-scale spontaneous docking.

The essence of PPP securitization is to convert non-standard assets into severable and transferable standardized financial products. Relying on this financial innovation, potential project investors can more conveniently arrange investment and exit plans independently, and professional financial capital such as public funds, industrial funds, and insurance funds can also obtain new investment channels. The PPP project itself, because of the increase in liquidity and attractiveness, can further reduce its financing costs.

Of course, in addition to the visible positive effects of the above-mentioned technical levels, PPP securitization is another potential effect that is likely to be more significant for China, a country in transition that is born out of the planned economic system, that is, relying on a highly active, transparent, standardized and legal open market, it can impose stricter external supervision and constraints on the government-enterprise relationship that PPP projects inevitably involve, and ensure that PPP projects promote various ownership capitals to complement each other and promote each other on the basis of equality and mutual benefit. Common development.

It is undeniable that the current "paternalistic" thinking and practices are still reflected in some local officials from time to time, and it is precisely because of this that the central leaders have repeatedly stressed the need to strengthen the awareness of contracts between the two sides of government-enterprise cooperation and improve the government's ability to perform contracts. This kind of government contract awareness and ability to perform contracts that are not abolished because of personnel affairs depends on the consciousness and self-discipline of government officials, but also on the external hard constraints of market forces and legal norms.

The development of China's market economy fully shows that financial innovation and financial deepening are an effective way to force local governments to continuously regulate the relationship between government and enterprises. A large number of empirical research results also show that listing has a significant optimization effect on the business environment of private enterprises, and more importantly, the market order that gradually expands based on the benign interaction between local governments and listed companies in the jurisdiction will continue to benefit a larger number of non-listed private enterprises.

Such successful experiences should naturally be copied and promoted, and the particularity of the PPP model (closer government-enterprise relationship) determines that after securitization is "a chess game", it is bound to have a more far-reaching and broader demonstration effect.