Mobilizing domestic capital markets for infrastructure financing: international experience and lessons for China, Parts 63-377

Report summarizes key elements of the papers presented at a conference held in Beijing on Nov. 12, 1996. China, like other developing countries, faces the challenge of upgrading and expanding its infrastructure facilities so that economic growth will not be jeopardized by infrastructure-related constraints. Exclusive dependence on external funding presents risks, for example if domestic costs are met by incurring foreign currency obligations. Increasingly, governments in emerging market economies are looking to domestic markets to help fund these massive infrastructure requirements. The domestic banking system is often unable to cope with theemand for long-term funds which such projects generate. Capital markets provide an opportunity for raising long term resources and channeling them to such projects. The present report draws on experience from industrialized and developing countries in terms of capital market financing of domestic infrastructure projects, and discusses the applicability of these lessons in the Chinese context. It also describes the strategies these economies have adopted to foster capital market development conducive to infrastructure financing, and discusses the role of the government in supporting theevelopment of such financial markets. Mechanisms for credit enhancement, such as guarantee schemes, and pooling arrangements for infrastructure financing, are also discussed. Finally, the report investigates China's present stage of development with regard to capital market development for infrastructure financing, and comments on how the fledgling domestic market could be strengthened.