The Distortion of Public–Private Partnerships in China: An Institutional Perspective of Central–Local Government Relations

AuthorYexin Mao
DOIhttp://doi.org/10.1177/00953997231158343
Published date01 April 2023
Date01 April 2023
Subject MatterArticles
https://doi.org/10.1177/00953997231158343
Administration & Society
2023, Vol. 55(4) 752 –776
© The Author(s) 2023
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DOI: 10.1177/00953997231158343
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Article
The Distortion of Public–
Private Partnerships in
China: An Institutional
Perspective of Central–
Local Government
Relations
Yexin Mao1
Abstract
How to explain the distortion of public–private partnerships (PPPs) is
underexplored. Drawing on principal–agent theory, this article proposes an
institutional incentive-driven framework. Based on a case study of PPPs in
China, this article finds that central–local government relationships play a
crucial role in shaping PPP performance. Goal incongruence and information
asymmetry lead to two types of distortion. First, PPPs become a political
task for local governments to respond to higher-level governments’ needs.
Second, PPPs serve as financing tools to create political achievements. These
opportunistic behaviors violate the goals of the central government’s PPP
policy and increase government debt risks.
Keywords
distortion, public–private partnerships, central–local government relations,
principal–agent problems, debt risks
1Hangzhou Normal University, China
Corresponding Author:
Yexin Mao, School of Public Administration, Hangzhou Normal University, No. 2318,
Yuhangtang Road, Yuhang District, Hangzhou 311121, China.
Email: yexinmao91@163.com
1158343AAS0010.1177/00953997231158343Administration & SocietyMao
research-article2023
Mao 753
Introduction
As a cooperative institutional arrangement between the public and private
sectors, public–private partnerships (PPPs) play a crucial role in public ser-
vice delivery and infrastructure development (G. A. Hodge & Greve, 2007).
PPPs have been widely adopted by many countries over the past four decades.
Governments seek to utilize private sector resources to develop infrastructure
and relieve fiscal pressure and debt risks (G. Hodge et al., 2018). However,
opportunistic behaviors occur in PPPs (Higuera-Molina et al., 2022; Maurya
& Srivastava, 2019). Many PPP projects do not realize their expected objec-
tives but increase government fiscal liabilities (Platz, 2016). Why do PPPs
fail to achieve their goals? How can we understand the distortion of PPPs?
Exploring these questions is significant for improving PPP performance and
creating effective intersectoral collaboration.
This article seeks to address these questions by investigating PPP develop-
ment in China. With the rapid development of PPPs since 2014, China has
become one of the largest PPP markets globally (S. Zhang et al., 2016). However,
PPPs in China have not achieved the expected goals of reducing local govern-
ment financial pressure and debt risks. Furthermore, PPPs create a new form of
hidden local debt, which threatens fiscal sustainability (Tan & Zhao, 2019).
Compared with the private sector, the public sector plays a dominant role
in developing PPPs in China. For instance, the government controls a large
amount of resources such as land and can selectively support favored enter-
prises and provide them with special deals such as increased access to key
resources (Bai et al., 2020).
With the mobilization of the government, some private enterprises actively
participated in PPPs in recent years. According to the Annual Report of
China’s PPP Market in 2020 released by Beijing Bridata Technology Co., Ltd
(2021) (the first domestic technology enterprise focusing on big data pertain-
ing to PPPs in China), in 2020, private enterprises participated in 527 PPP
projects, with a total investment of 246.1 billion yuan. In contrast, the num-
ber of local state-owned enterprises (SOEs) participating in PPP projects
reached 805, with a total investment of 1,494.1 billion yuan in 2020.
Meanwhile, the proportion of private enterprises participating in PPP projects
dropped from 43.43% in 2016 to 31.63% in 2020. Therefore, SOEs, espe-
cially local SOEs, play a dominant role in the development of PPPs.
Furthermore, central and local SOEs have been regarded as important
platforms for central and local governments to promote infrastructure invest-
ment and economic development (Tan & Zhao, 2019). Private enterprises par-
ticipating in PPPs face difficulties in financing, and it is difficult for them to
compete with SOEs (M. Zhou & Wang, 2020). Local governments’ emphasis

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