Public–Private Partnership in Developing China: Evolution, Institutionalization and Risks

Abstract

The goal of this chapter is to respond to the theoretical inquiries by scholars who are interested in how the public–private partnership (PPP) models adapt to China’s context where political power dictates economic strategies. We also want to provide suggestions to policy designers who aim to promote a sustainable investment environment for domestic and international investors. We review the literature that explains the upside and downside of PPP projects in contemporary China. (1) We classify the trajectory of PPP evolution into four phases, i.e., emergence, growth, recession and revival. (2) We note that private companies take a disadvantageous position in the partnership compared with governments and state-owned enterprises because of a lack of specialized legislation, unequal competition between private companies and state-owned enterprises and the opposition from the civic society. (3) We identify political risks as the most influential risks. Political risks also lead to the misallocation of other risks between public and private parties that contributes to the high failure rate of China’s PPP projects. Based on these findings, we recommend governments to draft specialized legislation, stabilize the political environment and provide favourable subsidies to local governments to limit the risks involved in PPP projects. We also advise private enterprises and state-owned enterprises to focus on negotiating over task and risk division with governments when they make decisions to participate in PPP projects. This full review of studies on PPP development in China provides reliable recommendations to scholars, governments and enterprises.

Citation

Li, N. and Song, Q. (2017), "Public–Private Partnership in Developing China: Evolution, Institutionalization and Risks", Leitão, J., de Morais Sarmento, E. and Aleluia, J. (Ed.) The Emerald Handbook of Public–Private Partnerships in Developing and Emerging Economies, Emerald Publishing Limited, Leeds, pp. 113-139. https://doi.org/10.1108/978-1-78714-493-420171004