Private capital hope for infrastructure sector

The track laying for the highspeed railway linking Hangzhou and Taizhou has been completed and the line is due to come into operation by the end of the year.

What makes the railway special is that it will be the first one of its kind with non-State capital controlling the shares. High-speed railways can be good money earners. The net profit of the high-speed railway between Beijing and Shanghai, for instance, increased by 4.6 billion yuan ($710.1 million) a year on average from 2014 to 2019.

The possibility of large profits attracts private capital. However, for a long time private capital has played a minor role in the construction of key infrastructure. This railway sets a precedent by allowing private capital to hold an absolute majority of the shares, which is an ice-breaking move.

For years, there have been calls for more openness to private capital in major infrastructure construction projects, and some cities have made progress in this regard. Yet private capital still lacks opportunity to participate in such infrastructure projects.

According to reports, the shareholding party has adopted a business model that features more commercial ways to make money, such as realty, shops and advertisements, instead of relying solely on the revenue from ticket sales. The authorities have also made it clear that they will support the railway operator determining the fare prices and the number of trains that will run.

All these show the government’s sincerity and determination in attracting private capital to infrastructure construction.

Just as market analysts point out, private capital pursues higher profits while State capital stresses public welfare. Good interaction and cooperation between the two will help boost the investment effect.

The demand for consumption and investment is expected to grow in the second half of the year. This calls for more positive policies to encourage private capital to play a more active role in the economy. On the one hand, the market entrance for private capital needs to be widened so that more private enterprises can participate in infrastructure construction. On the other hand, financing mechanisms need to be innovated so as to further lower the threshold for private enterprises.