Quick Take: China’s State Asset Watchdog Tightens Rules for Public-Private Partnerships

China’s state asset watchdog is moving to tighten oversight on projects where major state-owned companies are partnering with private investors amid rising concerns over financial risks arising from such cooperation.

State-owned Assets Supervision and Administration Commission (SASAC) has specifically barred big state companies under its jurisdiction from entering into Private-Public Partnership (PPP) projects not deemed economically viable or lack guaranteed funding, Yicai.com, a Chinese business and financial news site reported Saturday, citing a recent SASAC directive.

However, the powerful central government agency that control close to 100 top SOEs in China, stopped short of detailing the criteria to evaluate the economic and financial soundness of such projects.

The commission also listed six other requirements to consider when large SOEs enter into partnership projects with private companies. For instance, a large state-owned enterprise group, required by SASAC to exert prudent risk controls, should cap their overall spending on PPP programs to below 50% of its total net assets recorded in the previous year. Neither should it push up its debt ratio as a result of excessive spending on PPP projects, SASAC said in the document.

The heightened control of big SOEs and their PPP undertakings came after a flurry of moves by central government agencies including the Ministry of Finance, to curb PPP programs by state-owned firms amid growing concerns that such projects were abused to raise money through illicit channels.&

Contact reporter Li Rongde (rongdeli@caixin.com)