Bot Project Financing In The Application Of China's Urban Water Research

China's urban water industry will develop rapidly in the next thirty years with estimated annual investment requirement as much as more than one hundred billion yuan, among which those from the government will be in only small part while the most part expects the fulfillment of nongovernmental capital. Meanwhile China's urban water market, under open policy and profitable industrial situation, seems quite attractive to private capital for its high expectations on investment return. Nearly twenty years ago BOT was introduced to China as an efficient way of financing for infrastructures in private capital market, but its ten years' history in the urban water industry can be divided into three periods with the first two periods only performed by foreign investment and the third one mainly by domestic investment. In the first period, the foreign investors acted merely as capital suppliers with fixed percentage of return on the amount of their investments. The second period refers to Chengdu No. 6 Water Supply Plant which was sponsored by the central government as an experiment and executed more closely to standard BOT. Despite the absolute fixed return as in the first period, the investors participated in the plant's construction and operation. However its way of ensuring the investors by guaranteeing minimum sums of water purchase and purchasing price seems regretted to the government for its inefficiency on performance encouragement especially on risk sharing. The third period boomed since 2000 when the urban water industry attracted attentions of more and more domestic capital on the fact that hundreds of BOT water sectors appeared from then on. Actually BOT in this period changed into so-called "pre-BOT" when the investors usually offer guarantee for the project financing on the contrary of non-resource or iimited resource principle—one of BOT's important principles. The variation was based on the situation that most of China's banks had not yet developed relative business on project financing. To sum up, the above three periods witnessed the changing process on BOT in urban water industry-- from foreign capital to domestic capital, with one basically successful experimental project, but still far from real popular. As for the three main problems during the application of BOT in urban water industry, through analysis, this essay clarified the misunderstanding on the cost of BOT project, suggested solutions on BOT's key point the investment return pattern which is to attract investors to bear more management risks by "combination of tubes with plants", and clearly pointed out that insufficient lawful protection is the core reason for the problem of municipalgovernment's truthlessness and appealed for a complete national law instead of kinds of pending local administration regulations on BOT in urban water industry. In conclusion of this essay, the author holds that the application of BOT which is extremely significant for the development of China's urban water industry, with application conditions almost ready and close to maturity, under unsophisticated execution but with investment environment being improved especially along with the water price reform, should be pushed for extensive application.