High-speed rail sector “going abroad”: from EPC to PPP

China now adopts an EPC model for high-speed rail projects. With this model, Chinese enterprises set up plants or complete other engineering works for project owners, and abide by contractual provisions to transfer ownership and power of plant administration to project-to-project owners upon the completion of the design and construction work, which includes equipment installation and successful commissioning and pilot run.

Most other countries adopt a PPP model for project financing. The PPP model is significantly different from the government-led investment model long-practiced in China, and is intended to accelerate infrastructure facilities construction through a long-term franchise and right to earnings granted by government to the private sector. Should China adopt a PPP model in overseas high-speed rail construction projects?

A PPP model can better incorporate government support and private sector financing strength, hence maximizing profits. For project-owner countries, this model is a remedy to fiscal fund deficit and also a platform to diversify financing channels.

In China, a PPP model in overseas high-speed rail construction will be needed, as this model ensures a flexible solution to tackle uncertainties and risks encountered during the performance of contractual terms. Moreover, the participation of private enterprises in high-speed rail project construction and operations provides such enterprises more opportunities to diversify profit making channels and to boost competitiveness through continuous innovation.

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