(Yicai Global) July 3 -- Investment in transportation has entered the fast track in China yet again. From January through May, investment in road and water transport fixed assets jumped 27.8 percent year-on-year to CNY700.3 billion (USD103 billion), per statistics the ministry of transport (MOT) published. The western and southwestern regions topped the list as the country's largest transportation investment area, driven by the 'One Belt, One Road' and 'Western Development' strategies.
Yunnan, Guizhou and Sichuan Leading Race
Yicai Global found Yunnan and Guizhou registered the highest fixed asset investment in road and water transportation facilities among all western and southwestern provinces, while Xinjiang posted the fastest investment growth. The government of Xinjiang plans to launch 4,300 local transportation projects this year. As of the end of May, project plans for 3,500 of them were completed, with construction commencing for 2,544 projects.
In the first five months of this year, the total investment in transportation projects in the west far outstripped that in the central and eastern regions. Investments carried out in the western region totaled CNY328.3 billion, up 25.1 percent, the ministry data show. By contrast, the figure in the east rose 34.8 percent to CNY232.9 billion, and that in central China came in at CNY139.1 billion. This means that western provinces absorb more transportation investment due to their relatively underdeveloped infrastructure systems.
A breakdown of investment data by province reveals that transportation investment has exploded in many provinces in the western and southwestern regions, with Yunnan, Guizhou and Sichuan recorded the highest density of transportation investment projects. They logged total investments of CNY72.7 billion (up 35.7 percent year-on-year), CNY61 billion (up 16 percent) and CNY49.4 billion (up 11.4 percent), respectively.
Meanwhile, the northeastern region bucked the trend of the transportation investment boom. The three provinces in the region combined only CNY9.26 billion worth of investment – Liaoning registered CNY4.36 billion, down 20.8 percent; Jilin CNY3.2 billion, down 2.8 percent; and Heilongjiang CNY1.7 billion, up 16.6 percent.
China to Invest Heavily in Transportation Sector under 13th 'Five-Year' Plan
In the south, Guangdong province plans to increase its total road mileage to 250,000 kilometers by 2020. A complete motorway network of 11,000 kilometers will take shape. In terms of port and waterway facility construction, the government will establish local port clusters with well-defined business division, with ports in the Pearl River Delta identified as the 'main body', and those in eastern and western Guangdong as "two wings." The aim is to develop the province into a gateway on the 21stCentury Maritime Silk Road. By the end of the 13th "Five-Year" Plan period (2016-20), Guangdong will be home to eight seaports with a handling capacity of above 100 million tons. The total cargo throughput will hit 2 billion tons a year, and container throughput will reach 65 million standard containers a year. The total mileage of high-grade waterways will increase to 1,400 kilometers.
Total investment in transportation projects in China will amount to CNY15 trillion in the 13th Five-Year Plan period, said Ge Xin, an analyst at Lange Steel Information Research Center. This year, priority in transportation infrastructure construction will be given to Belt and Road interconnection projects, including the six transport corridors, main domestic trunk roads and transportation hubs. Demand on the steel market will remain stable for a long period to come with the launch of these projects.
Effective project financing is the key given the underdeveloped local economies in the central and western regions. Local governments need to set up new financing mechanisms to raise funds from multiple sources, allowing the public-private partnership (PPP) model to play a leading role in financing transportation facility construction projects.
Yicai Global reporter learned the ministry of transport piloted the PPP model on new toll road projects. According to statistics released by the ministry PPP center, as of April 2016, investments in transport related PPP projects totaled CNY4.5 trillion, outranking all other industries.
It goes without saying that development of PPP projects in China has resulted from the interplay of various factors such as funding demands, government function transformation and financing method innovation. However, it does not mean that applying the PPP model in transportation projects will not have any side-effects.
In many cases, PPP project review is performed only as a matter of formality, due to deficiencies in relevant regulations, lack of historical data and unfamiliarity with the new rules among local governments, pointed out Liu Jingxia, an advisor on PPP projects to the National Development and Reform Commission (NDRC), and senior partner at King & Capital Law Firm.