Big project financing requires creative approach

The creation of the Greater Bay Area requires a new way of thinking about how to finance its development going forward, and China Daily (Hong Kong) has produced a timely and insightful report on the subject. As the state-run news outlet explains, the construction of a rapid intercity transportation network is becoming “too large in scale to rely solely on local governments. Private enterprises should also gain many opportunities to participate in the Bay Area construction.”

But what should the financing model be? Build-Operate-Transfer? That didn’t suit the HZMB, the region’s single biggest project to date. Asset-backed securitization? Government-subsidized private projects? Perhaps there are creative ways to structure public-private partnerships (PPPs) that “meet project needs while conforming to the regulatory structures of various governments”, the media group opines. This will require some changes in government regulation, which, it seems, the article is suggesting are under consideration.

The article quotes Wallace Yu Ka-hung, at the Beijing-based sovereign wealth fund China Investment Corp, as saying private capital could flow into the Bay Area via PPP financing.

“As a modern city cluster development plan, some more innovative financing solutions should be introduced in the Bay Area,” Yu said.

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