Financing Sino-Singapore Tianjin Eco-City: What Lessons Can Be Drawn for Other Large-Scale Sustainable City-Projects?

Abstract

Sino-Singapore Tianjin Eco-City (SSTEC) is currently the best-known and arguably the most successful large-scale sustainable new town development project in China; as such, experiences gathered there are of significant importance for the development of other eco-cities in China and elsewhere. This article focuses on a thus far relatively understudied aspect of SSTEC, the financial vehicles used to fund SSTEC. The authors find that highly structured and intense collaboration at the national level between China and Singapore plays a catalytic role in attracting many other players to the project by giving them confidence that it is too big to fail. It encourages various preferential policies from lower governmental bodies, broad involvement of the private sector, a market-based operation model and the issuing of bonds in Singapore, which all contribute significantly to Tianjin eco-city's financial viability. The broad involvement of the private sector relieves part of the financial burden from local governments, while the bonds issued in international markets lower the interest rate for master developers. However, the Sino-Singaporean collaboration at the national level is far less likely to be replicated to other eco-cities, since this requires an enormous willingness on the part of other countries to invest manpower, money, and other resources into the construction of eco-cities in China.

A Global Review of Sustainable Construction Project Financing: Policies, Practices, and Research Efforts

“…Bank loans are one of the most common financial vehicles for sustainable construction due to its high flexibility in terms (e.g., long-term and short-term) and types (e.g., secured, unsecured, demand, subsidized, and concessional loans) [40]. Over past two decades, numerous banks around the world have been continuously arranging loans to finance the development of sustainable built environment.…”

“…Although various financial vehicles such as bank loans, green bonds, international assistance programs, government grants and tax incentives, and private capitals have been identified in the current literature [40,52,55,63,94], they are yet to be investigated systematically. Thus, the next step of sustainable construction project financing research can also go to the investigation of financial vehicles for sustainable construction projects.…”

“…In addition to the merits of bank loans, some of its disadvantages were also reported by literature. These disadvantages contained high financing costs, limited credit amounts, and complicated procedures to obtain approval from banks [40].…”

“…In USA, numerous tax incentives have been launched, such as Energy Investment Tax Credit, Tax Credit for Energy Efficiency Improvements to Existing Homes, Residential Energy-Efficient Property Credits, Energy-Efficient Commercial Buildings Deduction, and Energy-Efficient New Homes Tax Credit [52]. During the development of Sino-Singapore Tianjin Eco-City, it has been reported that Tianjin government also refunded part of taxes derived from the project in order to encourage its development [40].…”

“…They appropriate cash subsidy to sustainable construction projects directly. For example, from 2013 to 2015, the city government of Tianjin, China appropriated CNY 299.72 million (approximately USD 44.18 million) to Sino-Singapore Tianjin Eco-City to support the development of this sustainable construction megaproject [40]. In addition to government grants, tax incentives enacted by governments around the world are another financial vehicle to encourage the development of sustainable construction [63].…”