December 15, 2016 / 9:29 AM / 9 months ago

Some China local governments seen stoking debt risk through misuse of public-private partnerships

SHANGHAI (Reuters) - A top official of China’s finance ministry has criticized the misuse of public-private partnership (PPP) programs by local authorities, saying some chalk up debt for unsuitable schemes and others apply them to purely commercial projects.

The government will send inspection teams to some provinces to supervise their use of the programs, China’s vice-minister of finance, Shi Yaobin, said in a recent speech.

“These practices...affect the promotion of the PPP model, and increase local governments’ debt risk,” Shi said in the speech, published on the ministry’s website on Thursday.

The inspection teams will include officials from the State Council, or cabinet, the central bank, and ministries overseeing areas such as environment, finance and construction.

Beijing has been aggressively promoting public-private partnerships, hoping they could assist local governments to win private investment to fund projects, helping to cut debt and reliance on off-balancesheet borrowing.

Some local governments chasing investment and GDP growth had expanded the scope of projects and dressed up purely commercial projects as public-private partnerships, Shi said.

“Hidden barriers” erected by some local authorities made it harder for private investors to bid for such projects, which in turn blunted enthusiasm to participate in such schemes.

Other local governments were skipping the proper checks, meaning they took on high levels of debt without complete assessment of the projects.

Reporting by Brenda Goh; Editing by Clarence Fernandez

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