China is expected to roll out a string of supportive policies to encourage private investment for developing projects worth of millions of dollars, according to sources from the state environment watchdog.
China's Ministry of Finance (MOF) and the Ministry of Environmental Protection (MOEP) are considering polices to promote public-private-partnership (PPP) in addressing water pollution, the sources told Xinhua after they jointly released the implementation opinions regulating the PPP mode for water pollution prevention and control on Wednesday.
The opinions encourage PPP mode's participation in water pollution prevention and control areas; and require clarifying boundaries for projects, improving return mechanisms, and standardizing operating procedures.
"The government will offer more preferential financial policies to support project operation and reward outstanding performers," said Zhao Hualin, a senior financial official with MOEP.
Meanwhile, more innovative financial products and services such as pollution rights purchasing will be introduced to support private investment in water pollution control, Zhao added.
The aquatic ecosystem has been severely damaged in many parts of China, threatening public health and economic development.
The State Council unveiled a detailed action plan to fight water pollution in mid April. It said more than 70 percent of the water in the seven major river valleys, including the Yangtze and Yellow rivers, should be in good condition by 2020.
However, water pollution projects are always time-consuming and highly reliant on investment.
A single water pollution plant might take thousands of millions yuan to build and some analysts expect total investment would reach four to five trillion yuan if the outlined targets are to be met in 2020.
Meanwhile, most water pollution projects only offer returns of eight to nine percent while the financing cost for private firms from the banks could reach more than seven percent.
"High cost and low return in water pollution control projects have turned many private investors away and the whole mechanism is more administration-controlled than market-driven," said Chang Jiwen, an environmental policy expert with a state think tank of the State Council.
Chang suggested the government lower the investment cost and threshold for social capital to make water pollution control an affordable and profitable business.
"Banks and other financial institutions can roll out innovative environment-related financial products such as stocks or bonds to expand financing channels," Chang said.