Guiding Opinions of the State Council on Innovating the Investment and Financing Mechanisms in Key Areas and Encouraging Social Investment


Note:English version for reference only,Chinese version shall prevail.

Guo Fa [2014] No. 60 

People's governments of all provinces, autonomous regions and municipalities directly under the Central Government, as well as all ministries and commissions of and all agencies directly under the State Council,

To promote the strategic adjustment of economic structure, strengthen the construction of the weak link, promote the sustainable and healthy economic development, it is urgent to further innovate the investment and financing mechanisms in such key areas as public service, resources and environment, ecological construction, infrastructure, and give full play to the positive role of social capital, especially the private capital. To this end, the following opinions are hereby offered.

I. General Requirements

1. Guiding thoughts. It is necessary to comprehensively implement the spirit of the 18th National Congress of the CPC, the Third and the Fourth Plenary Session of 18th Central Committee of the CPC, to give play the decisive role of market in resource allocation, and to give better play the role of government, in accordance with the decisions and deployment of the Party Central Committee and the State Council. Efforts should be made to break industry monopoly and market barrier, effectively lower the access threshold, establish fair, open and transparent market rules, create investment environment featuring equal rights, equal opportunities and equal rules, further encourage social investment, especially private investment, revitalize the stock, make good use of the increment, adjust the structure, make up the deficiency, support the national productivity layout, speed up construction of key areas and increase the effective supply of public goods.

2. Basic principles. To unify market access, create equal investment opportunities, innovate in investment operation mechanisms, expand investment channel of social capital, optimize use directions and manners of government investment, give play the role of guidance, innovate in financing ways, broaden financing channels, improve pricing mechanism, and give play the leverage of price.

II. Innovating Eco-environment Protection Investment Operation Mechanism

3. To deepen the reform of forestry management system. It is necessary to advance the reform of management system for state-owned forests and forest farms, improve the forest operation and cutting management systems to realize the scientific operation of the forest. Efforts should be made to deepen the reform of collective forestry right system, stabilize the forest right contractual relations, loosen and enliven forestry management right, and encourage the legal and standardized circulation of forest right. It is required to encourage the legal circulation of forestry and forest right concerning afforesting the barren mountain and wasteland and returning the grain plots to forestry. Taxes and dues of forest right circulation shall be reduced to effectively lower the circulation cost.

4. To advance the diversification of ecological construction subjects. On the premise of strict protection of forest recourses, it is essential to encourage social capital to participate in ecological construction and protection, and support the qualified famer's cooperatives, home farms (forestry farms), leading specialized households, forestry enterprises and other new operation entities to invest in ecological construction projects. Crops under the economic forest and forest tourism are allowed for the afforestation projects with social capital in line with ecological benefits protection and land use regulatory requirements.

5. To carry out the marketization of environmental pollution control. In electricity, iron and steel industries and development zones (industrial parks), it should vigorously carry out the third-party pollution control, and via commissioned control service and hosting operation services, make the discharging enterprises pay the professional environment service company for pollution treatment and emission reduction, to make the pollution treatment more industrial and professional. The process of the government's purchase of environment monitoring service from the society should be steadily advanced and the third-party pollution treatment enterprise recommendation system for key industries be established.

6. To actively conduct the pilot transaction of emission right and carbon emission right. It is necessary to conduct the pilot program of paid use and transaction of emission right, establish emission right paid use system, standardize the emission right transaction market, and encourage social capital to participate in the emission reduction and emission right transaction; to speed up the adjustment of major pollutant emission charging standard and differentiate the emission charging policies; to accelerate the trial implementation of carbon emission right transaction system, explore the forest carbon-sink transaction, develop carbon emission right transaction market, encourage and support private investors to take part in carbon rationing transaction, find out the function of price via financial market and adjust the benefit of different economic entities, to drive the environmental protection and energy saving effectively.

III. Encouraging Social Capital to Invest in the Operation of Agricultural and Water Conservancy Projects

7. Efforts should be made to cultivate diversified investment subjects of agricultural and water conservancy projects. Support farmers' cooperatives, family farms, leading specialized households, agricultural enterprises and other new operators to invest in the construction of irrigation and water conservancy and water and soil conservation facilities, allow small irrigation and water conservancy and water and soil conservation engineering assets subsided by financial aid to be owned and managed by agricultural water cooperation organizations, and encourage social capital to take part in the construction and operation of major water conservancy projects of profit in the form of franchising, joint stock, etc. Social capital, that is willing to invest in the construction of major water conservancy projects, should be encouraged to make such investment.

8. To ensure the reasonable return on investment in agricultural and water conservancy projects. Social capitals investing in the construction or the operation and management of irrigation and water conservancy and water and soil conservation facilities, and major water conservancy projects concerning water saving and supply, are entitled to equal policy treatment with state-owed and collective investment projects, and to water supply fee and other earnings. Where the project offers public welfare, the construction, maintenance and management can be appropriately subsided by the government, and enjoy relevant preferential policies. Social capital, investing in the construction or the operation and management of irrigation and water conservancy facilities and major water conservancy projects, is entitled to legal rights inheritance, transfer, sublease and pledge. The collection, requisition or occupation of such projects should be compensated according to national regulations.

9. To attract social capital to participate in the development, utilization and protection of water resources through water rights system reform. There is need to accelerate the establishment of water right system, foster and regulate water rights transaction market, actively explore various forms of circulation way of water right transaction, and permit all regions to meet the reasonable new water demand via water right transaction; to encourage social capital to preferentially gain the right to use new water by participating in the construction of major water conservancy projects concerning water saving and supply.

10. To improve the pricing mechanism of water conservancy projects. It is necessary to carry out in a deep-going way the comprehensive pilot reform of agricultural water pricing and further promote agricultural water-saving. Pricing of non-agricultural water from water conservancy projects should be made in the principle of compensation cost, reasonable profits, high quality and low price and equitable burden sharing, and be adjusted based on water supply cost and social bearing ability. There should be two-part water price for water conservancy projects and prices for wet and dry seasons implemented. Where the price adjustment is not in place, the local governments may offer financial funds to the operation organizations to a reasonable extent.

IV. Promoting Marketization of Investment and Operation of Municipal Infrastructure

11. To reform the construction and operation pattern of municipal infrastructure. Efforts shall be made to promote public institutions engaged in the construction and operation of municipal infrastructure to step forward the enterprise management featured by independent accounting and autonomous operation. It shall be encouraged to break the decentralized business model in which each project is a unit, implement large-scale operation, reduce construction and operating costs, and improve investment efficiency. "A package of" investment and operation by industry shall be impulsively applied to the sewage collection and treatment and garbage treatment at city, county, town and village levels. Integrated urban and rural water supply and integrated investment and operation of factory and network shall be encouraged.

12. To actively push the social capital's participation in the construction and operation of municipal infrastructure. Various manners such as franchising, investment subsidies, government's procurement of services shall be adopted to encourage social capital's investment in urban water supply, heating supply, gas, sewage and garbage treatment, resource utilization and treatment of construction wastes, comprehensive urban pipe gallery, ancillary services of parks, public transport, parking facilities and other municipal infrastructure projects; the government shall choose qualified operators in accordance with the law. The government may employ the entrusted operation or transfer - operate - transfer (TOT) and other operation ways to transfer the built municipal infrastructure projects to the social capital for operation and management.

13. To strengthen the infrastructure construction in counties. It is advisable to develop those counties and key towns with favorable conditions into small and medium-sized cities based on the new-type urbanization development requirements, support their infrastructure construction and improve their capabilities to absorb the population moved away from agriculture. It is necessary to select several counties and key towns with industrial base, featured resources and regional advantages to be the pilot ones, and increase policy support to introduction of market mechanism into municipal infrastructure construction and operation.

14. To perfect the price mechanism of municipal infrastructure. It shall be accelerated to improve the formation, adjustment and compensation mechanism for price of the municipal infrastructure so as to enable operators to obtain reasonable returns. It is advisable to implement the upstream and downstream linkage mechanism concerning price adjustment; when the price adjustment is not in place, the local government may make reasonable compensation for businesses' operation with financial funds as appropriate.

V. Reforming and Improving the Transportation Investment and Financing Mechanism

15. To accelerate the reform of railway investment and financing system. We shall well use the railway development fund platform, attract the social capital's participation to enlarge the fund scale, take full advantage of the policies on comprehensive development of railway land to support railway development with gains from such development. Efforts shall be made to continue to improve the pricing mechanism of railway rate in accordance with the direction of marketization. It is appropriate to release the ownership and operation rights in relation to intercity railways, urban (suburban) railways, railways designed for resource development as well as branch railways to the local government and social capital. In accordance with the requirements of building a modern enterprise system, we shall safeguard the rights and interests of investors and promote the implementation of demonstration projects introducing social capital such as railways from west Inner Mongolia to the Central China, and railway from Changchun to West Bayanhua Town. It is encouraged to conduct comprehensive land development on the periphery of urban rail's transit stations and upper cover of the section for vehicle, and attract social capital to participate in the construction of urban rail transit, in the principle of "multiple linkage, all-around development, functional integration and economical and intensive development".

16. To improve the road investment and financing model. Efforts shall be made to establish and improve the road investment and financing model featured by government-led, graded responsibility, and diversified financing, improve the policies targeted for toll roads and attract social capital's involvement, so as to raise funds for road construction and maintenance through various channels. The mechanism for coordinative development of highways and ordinary roads shall be gradually established to promote the sustainable and healthy development of ordinary roads.

17. To encourage the social capital's participation in the construction of water transportation and civil aviation infrastructures. We shall explore the development of "aerospace and electronic integration" and other investment and financing models, grant investment subsidy based on relevant policies, encourage social capital's investment in building avionics hub, ports, inland shipping facilities, attract social capital's participation in the investment and construction of hub airports, trunk airports and airport supporting service facilities with favorable profits so as to expand funding sources for airports construction.

VI. Encouraging the Social Capital's Increasing Investment in Energy Facilities

18. To encourage the social capital's participation in electric power construction. Under the premise of effectively protecting ecological environment and resettling affected residents as well as ensuring engineering safety, we shall encourage social capital's investment in conventional hydropower station and the pumped storage power station through the owner's bidding and other ways. It is recommended to introduce the social capital's investment in nuclear power projects and encourage the private capitals' entry in the development of nuclear power equipment and nuclear power service under the premise of ensuring that the bodies with nuclear power holding qualifications assume the nuclear safety responsibility. It is necessary to encourage the social capital's investment in the construction of wind and solar electricity, biomass energy and other clean energy projects, as well as back-pressure cogeneration units, and involvement in the construction of clean and efficient coal power projects, and upgrading and reconstruction of coal-fired power plants' energy conservation and emission reduction.

19. To encourage the social capital's participation in power grid construction. Efforts shall be made to actively attract social capital' investment in the construction of trans-regional power transmission channels, and regional backbone network improvement and distribution network in large and medium-sized cities. Hainan's networking II circuit and transmission of ultra-high voltage direct current from northwest of Yunnan Province to Guangdong Province and other projects shall be taken as the pilot ones for introduction of social capital. We shall also encourage the social capital's investment in the construction of distributed power grid connection projects, energy storing devices and electric automobile's battery charging facilities.

20. To encourage the social capital's participation in the construction and operation of oil and gas pipelines, storage facilities and coal storage and transportation. It is necessary to support private enterprises and local state-owned enterprises and others to take equity stakes in the construction of trunk oil and gas pipelines, coastal liquefied natural gas (LNG) receiving stations, underground gas storage depots, urban gas distribution pipeline network and urban gas storage facilities, hold shares of construction of regional branch oil and gas pipelines, and commercial storage depots of crude oil and refined oil. We shall encourage the social capital's participation in the construction of trunk railway lines for coal transportation and coal storage and distribution system. The refining-chemical integration projects in petrochemical bases specified in the State plan shall be open to the social capitals.

21. To straighten out the energy pricing mechanism. Efforts shall be made to further promote the reform of natural gas prices, realize the combination of price of stock gas and that of incremental gas in 2015, gradually release the price of non-resident natural gas sources, and implement the policies on marketization of prices of unconventional gas such as shale gas and coalbed methane. The policies on price of transportation via natural gas pipelines shall be introduced as soon as possible. In the principle of reasonable cost plus reasonable profits, the benchmark prices for coalbed methane power generation and waste heat and pressure power generation and entry in grids shall be duly adjusted. The marketization of natural gas distributed energy cold, heat, electricity prices shall be promoted. The policies on price of power generated with renewable energies shall be improved. We shall also research and establish the compensation mechanism for drainage basin's cascade benefits, and duly adjust and improve the policies on environmental protection electricity prices of coal-fired generating units.

VII. Promoting Diversified Investors of Information and Civil Space Infrastructure

22. To encourage the further opening up of the telecommunications industry to private capital. We shall further improve laws and regulations, revise classified catalogue of telecommunications business as soon as possible, research and issue specific pilot measures concerned, encourage and guide private capital's investment in broadband access network construction and business operations to vigorously develop broadband users, promote private enterprise to carry out pilot mobile communication resale business to promote business innovation and development.

23. To attract private capital's further investment in information infrastructure. Support shall be given to the enterprises engaged in telecommunication infrastructure to introduce private strategic investors, and we shall promote China Tower Co. Ltd. to introduce private capital in order to achieve the development of mixed ownership.

24. To encourage the private capital's participation in China's construction of civilian space infrastructure. Efforts shall be made to improve policies on the civilian remote sensing satellite data, strengthen the government's procurement services, encourage the private capital to be used to develop, launch and operate commercial remote sensing satellites and provide market-oriented and professional services, and guide private capital's participation in the construction of satellite navigation ground application system.

VIII. Encouraging the Social Capital's Increasing Investment in Social Undertakings

25. To accelerate the reform with regard to classification of public institutions for social undertakings. It is advisable to actively promote the restructuring of qualified institutions in the areas of nursing of the aged, culture, tourism, sports and other, as well as qualified medical institutions in the region with rich resources related to public hospitals so as to create conditions for social capital's involvement; the social capital is also encouraged to participate in the reform of public institutions. It is recommended to transform the qualified state-owned units' training and convalescent institutions into the nursing institutions for the aged.

26. To encourage the social capital's increasing investment in social undertakings. Through wholly-owned, joint venture, cooperation, joint operation, leasing and other means, and in the manners such as franchise, construction by the government and operation by the social team, private construction with government's support, the social capitals are encouraged to participate in the construction of facilities for education, health care, the aged's nursing, physical fitness, and culture. It is necessary to put forward opinions on encouraging social forces to run education institutions, promoting the healthy development of private education as soon as possible. In the preparation of the overall urban planning, detailed regulatory planning and related special planning, all regions shall make reasonable planning and science layout of various public service facilities. Governments at all levels shall gradually expand the scope of governments' procurement of services, such as education, health care, the aged's nursing, physical fitness, and culture in order to promote equal participation of all types of operation entities. We shall include various qualified medical institutions into the scope of medical insurance

27. To improve and implement preferential tax policies concerning the construction and operation of social undertakings. It is necessary to further improve and implement preferential tax policies for non-profit institutions engaged in education, health care, the aged's nursing, physical fitness, and culture. All construction of non-profit health care and the aged's nursing institutions shall be exempted from the related administrative and institutional fees, and all construction of for-profit health care and the aged's nursing institutions shall be exempted from half of the related administrative and institutional fees.

28. To improve the policies on price management of social undertakings. With regard to utilization of electricity, water, gas and heat, the private educational and medical institutions shall be subject to the price policies same with those for the public ones, and the aged's nursing institutions shall be subject to the prices for living of residents. With the exception that the basic services provided by the public medical and the elderly care institutions are subject to the price policies prescribed by the government, other services in these areas shall be independently priced by the operators. The for-profit private schools shall have sole discretions for charges, and the charging policies of non-profit private schools shall be determined by the local government based on the direction of marketization and local conditions.

IX. Establishing and Perfecting the Public Private Partnership (PPP) Mechanism

29. To promote the PPP model. It is necessary to earnestly sum up experience, strengthen policy guidance, and actively promote the PPP model in the areas of public service, resources and environment, ecological protection, infrastructure, standardize the selection of project partners and introduce social capital to enhance the ability of public goods supply. Relevant government departments shall strictly follow relevant laws and regulations on budget management, improve fiscal subsidy system, and effectively control and prevent fiscal risks. Efforts shall also be made to improve the legal system for PPP model to ensure the smooth running of the project. It is encouraged to activate inventory resources by virtue of PPP model and enable the realized funds to be used for construction in key areas.

30. To well regulate the partnership to protect the interests of all parties. Relevant government departments shall develop management measures, issue the standard contract sample as soon as possible in which selection of owners, price management, return model, service standards, information disclosure, default penalties, government's takeover, assessment and demonstration and others in respect of PPP project shall be stipulated in detail so as to well regulate the partnership. We shall well balance the relationship between the interests of the public and investors, to not only prevent the public from loss of interests, but also safeguard the legitimate rights and interests of the operators.

31. To perfect the risk prevention and supervisory mechanism. The government and investors shall fully demonstrate the policy risks, business risks, environmental risks, and legal risks probably incurred by PPP projects; it is also necessary to complete the contract design, improve the dispute resolution and risk prevention mechanism. Efforts shall be made to establish an independent, transparent, accountable and professional PPP project supervisory system, and form a supervisory mechanism with participation of government regulators, investors and the public, experts and media.

32. To perfect the exit mechanism. The government and investors shall clarify the path for exit of PPP project to guarantee the sustainable and stable operation of the project. After the cooperation in relation to the project is over, the government shall well organize the takeover of the project to properly deal with the investment recovery and asset disposal and other matters.

X. Giving Full Play to the Leading and Promoting Role of the Government's Investment

33. To optimize the utilization direction of the government's investment. The government's investment shall be mainly targeted for the public and foundational construction. The government shall, based on the actual situations, grant investment support for key areas such as environmental protection, agriculture, forestry, water conservancy, municipal infrastructure, and social undertakings which the social capitals are encouraged to participate in, so as to give full play to the "skillfully deflected" leading and promoting role of the government's investment.

34. To improve the utilization manner of the government's investment. On even ground, the government's investment shall be preferentially used for supporting the project in which the social capitals are introduced; supports shall be granted for social capital's participation in the construction in key areas in the manners such as investment subsidies, capital injection, guarantee subsidies, loan with discounted interest. Administrative measures for the support by government's investment for social investment projects shall be formulated as soon as possible so as to standardize the arrangement actions concerning the government's investment.

XI. Figuring out Innovative Financing Ways to Broaden the Financing Channels

35. To explore the innovative credit service. Supports shall be given to carry out pledging loans with emission right, charging right, collective forest right, franchise right, prospective earnings of service purchase agreement, and collective land contract and operation right as well as other secured innovative loan businesses. It is necessary to explore and utilize pledging loans with prospective earnings of project's water and heat supply, power generation, sewage and garbage treatment and others, allow using related earnings as the source of repayment, and encourage financial institutions to provide financial support for social undertakings organized with private capital.

36. To enhance the agricultural financial reform. We shall explore to reinforce the loan and financing and risk resilience abilities of farmers' cooperative, family farms (forest farm), leading specialized households, enterprises engaged in agriculture and forestry in the manners such as credit guarantees and interest subsidies, business incentives, risk compensation, expense subsidies, investment funds, and mutual credit, and agricultural insurance.

37. To give fully play to the proactive role of policy-based financial institutions. Within the business scope approved by the State, more supports shall be granted to projects with regard to public service, environmental protection, infrastructure construction. We shall strive to provide long-term, stable and low-cost financial supports for major projects such as ecological environmental protection, agriculture, forestry, water conservancy, railways and roads in Central and Western China, as well as urban infrastructure.

38. To encourage the development of investment funds supporting the construction in key areas. It is advisable to vigorously develop private equity funds and venture capital funds, encourage the initiation and establishment of industrial investment funds with private capitals via private equity and other ways, which are mainly invested in public services, ecological environmental protection, infrastructure, regional development, strategic emerging industries, and advanced manufacturing and other areas. By using financial funds including investment within central budget, the government may provide them with supports through the way such as subscription of fund units.

39. To support the equity and debt financing of construction projects in key areas. We shall vigorously develop debt investment plans, equity investment plans, asset-backed instrument plans and other financing instruments, and extend the investment horizon, and guide social security funds and insurance funds to be used for infrastructure and basic industrial projects with stable earnings and long payback period. It is necessary to support construction projects in key areas to raise investment funds in the bond market by virtue of enterprise bonds, project income bonds, corporate bonds, medium-term notes and other manners. It is also advisable to carry forward the securitization of account receivables of enterprises engaged in the construction of railway, road, airport and other transportation projects. The local government's debt financing mechanism shall be established and standardized, and local governments shall be supported to issue bonds according to the laws and regulations to be used for construction in key areas.

Innovation of investment and financing mechanism in key areas is of significance for stabilizing growth, promoting reform, adjusting structure, and improving people's livelihood. All regions and departments shall focus on the overall situation, further raise awareness, strengthen organizational leadership, improve the working mechanism, and coordinate and enhance the innovation of investment and financing mechanism in key areas. Based on the local conditions, the local governments shall pay close attention to the preparation of specific implementing rules and ensure the actual implementation of all measures. The relevant departments of the State Council shall strictly follow the division of labor to formulate related supporting measures as soon as possible to accelerate the construction in key areas, and also strengthen such measures' publicity and interpretation to enable the social capital holders to understand relevant policies for the social capital's participation ways, operation ways, profit model, return on investment and others, further stabilize market expectations, fully mobilize the enthusiasm of social investment, and well give play the key role of investment for economic growth. The National Development and Reform Commission (the "NDRC") shall, in concert with relevant departments, strengthen the supervision over and inspection of the implementation hereof. All major problems, if any, shall be promptly reported to the State Council.


Appendix: Scheme on Division of Labor for Preparation of Key Policies and Measures Documents

State Council

November 16, 2014

(This Circular is issued publicly)


Note: Where there are two or more responsible units, the one ranked first is the leading unit.