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Private Funds Flood into Shanghai Infrastructure Projects
Private investment accounts for half of the total investment in infrastructure projects in Shanghai, China's industrial and financial hub, latest official figures show.

"The breakthrough occurred this year with private funds going to state-run infrastructure projects," said Yang Jianwen, professor with the Shanghai Academy of Social Sciences.

About 70 percent of investment in the city's expressway projects has come from private investors so far.

Since the mid-1990s infrastructure projects in Shanghai have attracted non-governmental capital. The Hong Kong-based CITIC Pacific Ltd. bought 20-year franchise rights for three major bridges and 30-year franchise rights for a tunnel in the city. But domestic private and individual investors had long been barred from the business.

In spring this year a domestic private investment company named Fuxi paid 3.21 billion yuan for 99.35 percent of shares in a state-owned investment company approved by the Shanghai municipal government to finance the city's infrastructure development.

The purchase enabled Fuxi to obtain a 30-year usufruct, a kind of operational lease of the expressway between Shanghai and Hangzhou, capital city of east China's Zhejiang Province.

The deal is regarded by local analysts as a breakthrough for domestic private capital flow. "The deal can be said to open the door for non-governmental funds into expressway business," said Yang. "More funds are expected to flow in."

Besides institutional investors, individuals in Shanghai have also begun to get involved. The Shanghai International Trust and Investment Corporation recently launched an investment program for a maglev railway project to the public. About 200 million yuan was collected an hour after the offer opened.

A trust and investment company financed a 550 million yuan tunnel project in seven days, much more quickly than the company had expected. And two-thirds of the money came from individual investors.

Fixed assets investment in Shanghai totaled over 130 billion yuan in the first eight months of this year, a year-on-year rise of 30 percent. Money from the government budget accounted for merely 1.2 percent of the whole amount.

The city's fixed assets investment is tipped to top a record 200 billion yuan by the end of this year.

Yang said that the majority of that amount would come from non-governmental investors both at home and abroad.

Analysts noted that the annual returns for investment in infrastructure projects such as tunnels and expressways were considerably higher than the interest rate and returns for government bonds, which could be the reason why private funds were flooding in.

(Xinhua News Agency October 8, 2002)

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