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《Urban Mass Transit》 2006-03
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PPP Pattern Financing in Urban Mass Transit Realm of China

Xie Weidong,He WenChina Development Bank,100037,Beijing,China  
Informative abstract PPP mode is a title of an agreement of concessionary management that is reached by the private section and the public section.It can also be regarded as a kind of service form that the public section contracts out to the private section.In Britain,this name is called PFI(Private Finance Initiative).Beijing Metro Line 4 and Shenzhen Metro Line 4 are the first rail transportation items of PPP mode that China has adopted.The basic train of thought about the implementation of PPP mode in China is that the government invests the part with stronger public feature,but is no longer responsible for the management deficiency of the item.While the payoff part of the subway item is distinctly shown up in order to attract social investment for concessionary management.The investment of Beijing Metro Line 4 is about $15.3 billion,which is divided into two parts: Part A and Part B.The Municipality of Beijing and Beijing Metro Management Company,consists of social investors,signed the agreement of concessionary management for Line 4.In this agreement,the government is responsible for Part A,including the costs of civil engineering and removals,which is about $10.7 billion.The concessionary company is responsible for Part B,including the operational facilities,such as machinery and electricity equipment,and collects or raises a loan toward the public.The amount of investment in Part B is about $4.6 billion.The management company will obtain some right of Part A through a lease after the item starts,and be responsible for the operation and management of Metro Line 4,including the maintenance of all the facilities(two parts:Part A and Part B),the renewal of all the property except the tunnel? and the management of the businesses inside stations.In the meantime,the company shall reclaim the investment by providing services,collecting subway fares and running the business inside stations.The government has the right for its investment,but shares no corresponding income.The concessionary company possesses the right to use and to gain profit from the government investment,at the same time,the government will examine the service quality and the working efficiency of the concessionary company,by taking corresponding measures of encouragement or restriction.In case of breaking the contract on the part of the concessionary company,the government maintains the right to take back the management of the item and that to deal with the properties.The concessionary management is divided into the management on trial and the management in due form.The term of the concessionary management is 30 years from the day of the trial management.At the end of the term of the concessionary management,the concessionary company will hand over the whole item to the government without any return.The loan limit of the concessionary company for Beijing Metro Line 4 is 70% of the total investment of the item,(among) which 50%~70% loan is the fixed rate interest.According to practical needs,the terms may be classified into 10 years,15 years and 20 years.The fixed rate interest will become a floating rate when the term of loan is over.The rest part is the floating rate interest,which takes about 30%~50% of the total loan.The floating rate interest is the interest rate floating down by 10% the benchmark interest in the corresponding term published by the People's Bank.The term of the loan is 25 years.Shenzhen Metro Line 4 also adopted the similar structure design of the loan.Because the financing need of the concessionary company is strongly supported by the banks,the cooperation of the State Exploitation Bank with Beijing Metro Line 4 item and Shenzhen Metro Line 4 item helped the concessionary company to control the risk of investment successfully,which greatly enhanced the confidence of the investors.The State Exploitation Bank,with its special advantages in providing financial products,will be expected to play a leading part in the financing of PPP mode.At present,the global economic prosperity index is comparatively low.Both the foreign capital and the local capital have been seeking for good investment items.The industry of urban mass transit has a stable return,as long as a better pattern of payoff is found,it is really worth investing in this field.Now,there are not any policy obstacles for the foreign capital to enter the urban mass transit market of China,we are sure that this market will become more and more attractive in the coming years.
【CateGory Index】: F572
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