Revitalizing stock assets to draw social capital for projects

The General Office of the State Council, China's Cabinet, recently promulgated a guideline aimed at further activating stock assets to expand effective investment.

China has accumulated a large amount of stock assets in transportation, water conservancy, urban construction, warehousing and logistics after years of investment and construction.

However, against the backdrop of increasing downward pressure on the economy, China needs to invest in new projects and form a virtuous cycle between a lot of "sleeping assets", or assets being used inefficiently, and new investment.

Practice shows that revitalizing stock assets will not only help recover funds, but also attract various kinds of social capital to participate in the construction of projects in key areas.

At present, the stock assets that can be activated in China involve transportation, water conservancy, clean energy, affordable rental housing, municipal facilities such as water, electricity and heating supplies, ecological and environmental protection, industrial parks, warehousing and logistics, and new infrastructure projects.

According to estimates, the stock infrastructure assets in China can reach 100 trillion yuan ($15 trillion), and even if only 1 percent of them is activated, there is a fund scale of more than 1 trillion yuan.

However, despite the large scale of stock assets, many stock assets lack stable cash flows and returns, and the proportion of assets that can meet market requirements and gain stable income is relatively low.

The lack of complete land ownership, property rights certificates, fixed assets investment management procedures and other compliances will also hinder the market entry of some stock projects. In addition, the tax burden involving stock assets in their securitization or financial products in their establishment, operation, distribution, and withdrawal will also increase transaction costs and reduce investment returns, thus dampening the enthusiasm of relevant parties to do this job.

To further strengthen policy support for the activation of stock assets, the State needs to comprehensively review the status of stock assets, select projects with activation conditions, strengthen project planning and redevelopment, and effectively improve the level of project incomes.

Local governments should further improve their dynamic pricing mechanism for public services and goods, and legally adjust sewage and garbage treatment charges, water prices, entrance fees and other prices or subsidy standards. Also, reasonable asset portfolio and comprehensive development models should be used to improve the returns of activated stock assets.