The PRC Security Law prohibits a government entity from giving guarantees in favour of a foreign entity except in very limited circumstances. The Circular reinforces this policy, it provides that the government is not to provide any guarantee for any fixed returns on investments in a project. Indirect assistance from the government in the forms of support letter or the passing of supporting legislation, as in the cases of Laibin B and the Da Cheng Water Treatment Project in Shanghai, is however likely to continue. The problems mentioned above are real but surmountable. To enhance the chance of success, care should be taken in deciding how funding will be obtained.
Commercial banks are also active in providing financial advisory services.
Investors are reluctant to assume the relatively high degree of risks associated with the construction phrase of projects. Capital markets instruments may play a more important role in the refinancing of bank loans as the project matures and generates a more or less stable income stream. Most ECAs are government agencies and limited recourse project financing is not their main area of responsibility. It can sometimes be a time consuming process which requires careful management. On the other hand, the involvement of an ECA in a project can add to its creditability.