PPP projects have en­tered the ‘fast lane,’ says China In small cities, but con­struc­tion out­paces de­mand

Kuwait Times - - BUSINESS -

China’s pub­lic-pri­vate part­ner­ship (PPP) project con­struc­tion has en­tered the “fast lane” and will be­come a uni­fied, stan­dard­ized, trans­par­ent mar­ket, a gov­ern­ment re­search of­fice said. As of the end of June, there were 13,554 projects na­tion­wide with in­vest­ment of 16.3 tril­lion yuan ($2.4 tril­lion), ac­cord­ing to data from the China Pub­lic Pri­vate Part­ner­ships Cen­ter, the of­fi­cial Xinhua news agency said yes­ter­day.

More than 34 per­cent of projects had reached the im­ple­men­ta­tion phase, it said. “Our coun­try’s pub­lic-pri­vate part­ner­ship project con­struc­tion has en­ter the fast lane, an ac­tive pe­riod,” Xinhua cited Wang Yim­ing, deputy di­rec­tor of the State Coun­cil De­vel­op­ment Re­search Cen­ter, as say­ing.

But Wang warned that as more projects moved from con­struc­tion to op­er­a­tions, more risks were ex­posed, such as ex­ces­sive fi­nanc­ing that has led to high fi­nan­cial lever­age and debtto-cap­i­tal ra­tios, and im­prac­ti­cal projects in ru­ral ar­eas. In re­cent years, the gov­ern­ment has tight­ened con­trols on new lo­cal gov­ern­ment debt to help ward off risks fol­low­ing a bor­row­ing binge since the global fi­nan­cial cri­sis.

Au­thor­i­ties have also vowed to pre­vent lo­cal gov­ern­ments from us­ing pub­lic-pri­vate part­ner­ships, gov­ern­ment in­vest­ment funds and gov­ern­ment pro­cure­ment ser­vices as “dis­guised chan­nels” for rais­ing debt. The State Coun­cil, China’s cab­i­net, has said re­solv­ing lo­cal debt risks was im­por­tant to en­sure the coun­try’s eco­nomic and fis­cal sus­tain­abil­ity and fi­nan­cial safety.

China’s to­tal pri­vate and pub­lic debt has ex­ceeded 250 per­cent of gross do­mes­tic prod­uct, up from 150 per­cent be­fore the global fi­nan­cial cri­sis, ac­cord­ing to the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment.

Lux­ury lake­side homes and high-rise con­do­mini­ums are com­ing up fast in China’s sleepy in­land town of Bengbu, a clear sign that a home­buy­ing frenzy sweep­ing across the coun­try’s ma­jor me­trop­o­lises and pro­vin­cial cap­i­tals has reached even its smaller cities. The in­crease in de­mand is wel­come news for smaller cities that have a mas­sive over­hang of un­sold houses left from the last real es­tate down­turn three years ago. How­ever, the surge in con­struc­tion threat­ens to out­pace or match the in­creased de­mand for hous­ing, leav­ing hous­ing in­ven­to­ries un­touched.

That will be a worry for China’s pol­i­cy­mak­ers, who want to keep the real es­tate mar­ket sta­ble ahead of a once-ev­ery-five-years Com­mu­nist Party con­gress in the au­tumn that will see a reshuf­fle of se­nior lead­ers. The prop­erty mar­ket in Bengbu, once a fish­ing vil­lage on the banks of the Huai River and Lake Longzi, has been among the top three fastest-grow­ing in China’s 70 main cities in re­cent months although the lo­cal econ­omy is soft - the re­gion’s main glass-mak­ing in­dus­try has been hit by the gen­eral growth slow­down. Prop­erty an­a­lysts say prop­erty de­mand in such smaller cities has surged be­cause lo­cal gov­ern­ments of­fer cheap credit and im­pose next to no re­stric­tions, un­like in the big­ger cities, where de­fenses are in place to fend off spec­u­la­tion and pre­vent for­ma­tion of prop­erty bub­bles. Real es­tate in tier-3 and tier-4 cities, ranked be­low the ma­jor me­trop­o­lises and the pro­vin­cial cap­i­tals, is where the growth is now, an­a­lysts say, but the fren­zied con­struc­tion means the stock of un­sold homes has re­mained stub­bornly high. Nearly 50 mil­lion square me­ters of real es­tate, or about 550,000 homes, were sold in 27 tier-3 cities in Jan­uary-May this year, which should have re­duced in­ven­to­ries by 45 per­cent, ac­cord­ing to Reuters cal­cu­la­tions based on a pri­vate es­ti­mate of in­ven­to­ries in China’s main small cities.

In re­al­ity, in­ven­to­ries only dropped 7.1 per­cent to 102 mil­lion sq m, equiv­a­lent to 1.1 mil­lion homes, data by Shang­hai-based E-house China R&D In­sti­tute showed, be­cause of new con­struc­tion. Prices for new homes in Bengbu surged 3.4 per­cent on-month in May, the high­est among all 70 ma­jor cities, data from the Statis­tics Bureau showed. Bengbu ranked sec­ond-high­est in April and third-high­est in June. “We think the mar­ket will con­tinue to be good even though we don’t ex­pect a dras­tic rise in prices any­more,” said a man­ager sur­named Huang at Bengbu Jin­hui Real Es­tate, a pri­vate de­vel­oper that has ac­tively bought land rights in Bengbu. —Agen­cies

SHANG­HAI: La­bor­ers work at a new prop­erty de­vel­op­ment un­der con­struc­tion on the busy Nan­jing Road shop­ping street in Shang­hai.

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.