Research On PPP Project Asset Securitization

In China,the majority of the private participants in public-private partnership(PPP)projects are state-owned enterprises and large local government financing platforms.On the contrary,private investors lack enthusiasm for those projects to improve capital mobility.Hence,in order to involve all market participants in PPP models,the government has released policies to encourage asset securitization of PPP projects.On the basis of that,in 2017,the National Development and Reform Commission took the lead to promote implementation of a batch of demonstration projects to facilitate carrying out asset securitization in PPP projects in which the policy's stickiness is stronger to set an example for large-scaled PPP projects in China.The Qingchun Road Tunnel PPP project of Zhejiang Datong New Group and Huaxiaxingfu studied in this paper is one of the demonstration projects.This paper analyzes in depth background,operational logics and procedures and financial motivations of asset securitization of the Qingchun Road Tunnel PPP project of Zhejiang Datong New Group and explains what PPP projects have in common to achieve successful asset securitization,that is,a reasonable return mechanism for investment,a continuous and stable cash flow and stable credit of original stakeholders.Then,this paper compares and analyzes asset securitization of heating charge income right of the Gu'an New Industry City PPP project of China Fortune Land Development,which is also among the first batch of the demonstration projects.It points out that although both are PPP projects,after asset securitization,the Qingchun Road Tunnel PPP project of Zhejiang Datong New Group has obvious advantages in issue price and maturity.In the Qingchun Road Tunnel PPP project of Zhejiang Datong New Group,government subsidies are the main source of cash flow for the underlying assets.Consequently,it will lead to misunderstandings that Zhejiang Datong New Group takes advantage of asset securitization of the PPP project to raise funds with government credit as its guarantee,increasing the implicit debts on the local government in disguised form and transferring the payment responsibility of the asset securitization products to the government.Nonetheless,upon comparative study,the author learns that the advantages of Zhejiang Datong New Group are not caused by the cash flow source for the underlying assets in its PPP project.It is because of a larger cash flow coverage ratio and measures to improve capital mobility when asset securitization products are designed.It proves that so long as asset securitization products are designed properly,asset securitization can also be applied to government-paid projects.In addition,according to data collated in this paper,those PPP projects such as the Qingchun Road Tunnel project,which are operated under the BOT model,account for about 80% of PPP projects in China.It also reinforces the exemplary role of the Qingchun Road Tunnel PPP project of Zhejiang Datong New Group,having referential significance to asset securitization of PPP projects further.Meanwhile,after comparative study of PPP projects at home and abroad,the author finds out that asset securitization of PPP projects in China basically lacks external credit enhancement and measures for bankruptcy remote.Therefore,the author points out that asset securitization of PPP projects in China should be improved and completed further.Regarding current shortcomings,the author puts it forward that future policies on asset securitization of PPP projects should focus on "credit enhancement" and "bankruptcy remote" to develop sound securitized assets in PPP projects.In the end,the author makes a good prospect of asset securitization according to the current market capacity of PPP projects.