After two years of intensive promotion in 2014 and 2015, the PPP model of government and social capital cooperation will reach the final year of its three-year pilot in 2016. Authoritative sources have pointed out that the "13th Five-Year Plan" will witness another peak in China's urban infrastructure construction, and the officially launched PPP model will embrace broad development space.

"After two years of exploration, the promotion and application of the PPP model in China have achieved initial results," said Sun Xiaoxia, Director of the Financial Department of the Ministry of Finance, recently. She pointed out that promoting the PPP model is not simply project financing, but a revolution in concepts and ideas, representing both an improvement in national governance capacity and an upgrade in fiscal management methods.

The promotion and application of the PPP model began with the Third Plenary Session of the 18th CPC Central Committee. After a year of preparation in 2013, a year of development in 2014, and a year of deepening and improvement in 2015, the PPP model finally entered a stage of rapid development in 2016 as the "13th Five-Year Plan" begins.

The proposal for the 13th Five-Year Plan suggests innovating the ways of providing public services: where services can be provided by government purchase, the government will no longer directly undertake them; where they can be provided through cooperation between the government and social capital, social capital will be widely absorbed to participate.

In 2014, China's total real estate investment reached 9.9 trillion yuan, while urban infrastructure construction investment, excluding electricity and telecommunications, totaled 1.64 trillion yuan, far below the World Bank's recommended 1:1 ratio of real estate investment to infrastructure investment.

At present, China's urbanization rate is only 54%. To reach the level of over 70% in developed countries, there is still great room for development. Bridging the shortcomings in infrastructure construction will undoubtedly provide more opportunities for social capital to participate in urban construction through the PPP model.

When deploying work for 2016, Chen Zhenggao, Minister of Housing and Urban-Rural Development, proposed that the country will continue to vigorously promote urban infrastructure construction this year. We will accelerate the pace of underground comprehensive utility tunnel construction, comprehensively plan and launch sponge city construction, and achieve substantive progress in the treatment of black and odorous water bodies in cities.

The huge urban infrastructure market has attracted the attention of social capital. In addition to engineering construction enterprises, institutions in the financial sector such as insurance are also highly concerned about PPP and actively seeking entry channels, intending to seize the investment market at the fastest speed.

However, although the PPP model has ignited the fire of social capital participation in urban infrastructure and other project construction across the country, industry insiders say that the development of the PPP model still faces problems such as inadequate conceptual transformation, low project implementation rates, capacity building that needs strengthening, and a market environment that needs improvement.

In this regard, experts believe that PPP is a difficult and detailed task, involving both conceptual and ideological changes and institutional and mechanism reforms. China has initially established the institutional framework for PPP in two years, but this is only the first step of a long march. The next step is to further optimize the legal environment, correct false PPPs, improve related supporting policies, and focus on promoting the standardized development of PPP.

The key to promoting the application of PPP projects lies in ensuring that private investors obtain stable investment returns. To this end, the government must learn the ability to "mortgage" from social capital, change concepts and improve the reform of the government management system; at the same time, relevant policy mechanisms must also be improved to ensure the precision and effectiveness of policies.

"Looking ahead, PPP reform is always on the way." Currently, two major measures to advance the PPP institutional construction—PPP legislation and the concession law—are both in the planning stage.

As the curtain rises on the "13th Five-Year Plan," the PPP model, as a reform measure focusing on supply-side reform with demand pull as a supplement, will undoubtedly become the propeller for China to practice innovative, coordinated, green, open, and shared development in the next five years.