A multi-million dollar development finance-backed project in China is attempting to make the country's nascent "land value capture" project finance model pay off for major river remediation works. A proposal backed by the Asian Development Bank (ADB) for integrated ecological restoration and management of the Mulan River Basin in Xianyou County, Fujian, was recently approved by the Fujian provincial government. The total investment under the project will be RMB3.85 billion ($575 million), including a $200 million loan from the ADB and a proposed KfW Bank loan of €120 million ($126 million). The rest of the cost will be funded by capital from both the public and private sectors. The project, which has an estimated construction period of 60 months, is believed to be the first time the land value capture (LVC) model has been deployed in the water sector. It is similar to the eco-environment-oriented development (EOD) model that the Chinese government has been piloting since April 2021. It involves the public authorities raising finance leveraged against the increased future land value and associated business and residential rate income that will come with infrastructure improvement. The model is most closely associated with mass transit and other urban development works.
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