Study On Airport Financing Mode In Terms Of PPP

With continuous growth in Chinese living standards thanks to construction and development as a result of China’s Reform and Opening Up over past several decades, Chinese people have an increasing demand for convenience and speed of public transportation, which brings a high-speed growth in China’s civil aviation industry and a great change in construction and operation of China’s airports. To the end of 2013,24 airports in China have witnessed ten million passengers for a year. Large- and medium-sized airports are reaching their design capacity and are eager for extension, with the majority of them needing new construction. It is inevitable that fast growth of airport requires an enormous amount of money. Hence, airports shall combine well-grounded planning to meet demands in economic growth with innovative development qualification and financing modes.With economic restructuring and deepening reform of China in new environment, various financing modes for airport construction are must for sustainable growth of airports. Strengthening the foundational effect of market for resource allocation is the only way toabandon extensive investment and financing modes in the past and resort to market sophistication and innovative investment mode, which will improve both effectiveness and efficiency of airport investment.Civil aviation industry is an important industry in China which is critical to the national economy and the people’s livelihood. The majority of airports in China are constructed, managed and operated by state-owned companies supervised by State-owned Assets Supervision and Administration Commission of the State (Provincial/Municipal) Council. Such companies will also be responsible for construction financing and debts repayment. It expressly states in Decision of the CCCPC on Some Major Issues Concerning Comprehensively Deepening the Reform issued by Central People’s Government of the People’s Republic of China in 2013 that:For the purposes of construction and operation of municipal infrastructure, local governments are granted to attract private capital to take part in such construction and operation by issuing government bonds to diversify financing channels for municipal construction and stimulate market economy. Based on that, Public Private Partnerships (PPP mode) is officially put forward in September,2014, in Notice of the Ministry of Finance on Issues concerning the Implementation of Public-Private Partnership Demonstration Projects. Under the lead of the Ministry of Finance, Public Private Partnerships (PPP) Center was also founded mainly for policy study, consultancy and training, capacity development, financing support, data collection and international communication in relation with PPP with the aim of deepening the implementation of PPP. Meanwhile, The State Council of the People’s Republic of China issued Document 43 in September, 2014, to clear up local government debts and regulate debt financing of government step by step.Traditional financing for airport construction is mainly supported by governmental funds. Such financing mode is always faced with quite a few problems such as enormous financing amount, strict control of capital cost, improvement of social welfare and effective use of social resources. Therefore, it is in an urgent need to explore new channel and new mode for airport construction and financing in new environment.This thesis elaborates on concept of airport financing and provides a summary of domestic and international financing modes regarding airport construction, airport operation and development direction. This thesis also points out the advantages and disadvantages of such modes under current circumstances. What’s more, this thesis elaborates on problems faced with current airport constructions in China, such as single financing channel, ineffective use of state-owned capital and low marketization degree. By taking Chengdu Tianfu International Airport Project and Shanghai Pudong International Airport as an example, this thesis has an analysis on the background, motive and specific operation of PPP mode they adopt to find out advantages and disadvantages of PPP. Based on such analysis, this thesis further expounds duties and mutual relationships of all parties involved in PPP and puts forward some corrective and improving measures to the operation process of and potential problems faced by China’s airport construction financing to make successful implementation of PPP.