The Rise of Public–Private Partnerships in China: An Effective Financing Approach for Infrastructure Investment?

Date01 July 2019
Published date01 July 2019
514 Public Administration Review July | A ugus t 201 9
Public Administration Review,
Vol. 79, Iss. 4, pp. 514–518 © 2019 by
The American Society for Public Administration.
DOI: 10.1111/puar.13046.
Jie Tan
Zhejiang University
Jerry Zhirong Zhao
University of Minnesota
The Rise of Public–Private Partnerships in China: An Effective
Financing Approach for Infrastructure Investment?
Abstract: The rise of public-private partnerships (PPPs) in China has spurred heated debates about their purpose
and effectiveness. This article traces the fluctuation of China’s PPPs over several decades and finds that PPPs have
played a supplementary role in China’s infrastructure investment, as a response to the pressures of fiscal shortfalls and
government debts. The resurgence of PPPs in recent years aims to bridge the infrastructure gap and alleviate ballooning
local debts. These expectations, however, are hard to realize. China’s PPPs mainly involve state-owned enterprises and
place increasing financial burdens on the government. The central government has taken measures to attract private
sector investment to mitigate the financial risk, but the prospects for PPPs remain unclear.
The number of public-private partnerships
(PPPs) in China has soared in recent years. By
October 2017, the government had initiated
14,220 projects with an expected total capital value
of 17.8 trillion renminbi (RMB) (about US$2.6
trillion). Taking place at an unprecedented scale in
global history, the boom of PPPs in China since 2014
has been promoted as a new financing approach in the
context of accelerating urbanization (Zhao, Su, and
Li 2018). Official statistics show that the share of the
urban population increased more than threefold from
1980 to 2017. This rapid expansion of urbanization
results in an enormous challenge for infrastructure
construction, which calls for large-scale monetary
investment. In China’s reform era, infrastructure
investment has been fueled mainly by local
governments adopting unconventional approaches,
such as land transfer fees (LTFs) and land-based
financing (Wu 2010). These approaches, however,
have led to concerns about the sustainability of the
financing structure (Zhan, de Jong, and de Bruijn
2017). Under these circumstances, PPPs, which offer
new hope for the Chinese government in promoting
infrastructure construction, have expanded sharply in
Nonetheless, there are increasing debates on
the essence of PPPs and their performance in
infrastructure investment in the international and
domestic media (Brekelmans 2018; Zhang and
Ouyang 2015). Recent academic studies, usually
within the areas of project management and public
administration, pay attention to the quality of
PPP implementation by focusing on the drivers,
risk allocations, and critical success factors of PPPs
(Chou and Pramudawardhani 2015), as well as
the institutional environment (Zhang et al. 2015)
and private involvement (Wang et al. 2018). Little
effort has been devoted to revealing PPPs’ goals or
appropriateness in infrastructure investment. This
article aims to fill this gap. First, this article examines
the rise of PPPs in China since 2014, including their
scale, scope, and types. Second, in a longitudinal
context, we characterize the role of PPPs through
the lens of infrastructure finance capital structure,
which consists of fiscal revenues, governmental
debt financing, and PPPs. Lastly, we discuss the
effectiveness of PPPs as an alternative financing
approach in China.
Scale, Scope, and Types of PPPs in China
PPPs in China, which are dubbed “collaboration
between the government and societal capital,” have
grown at a staggering rate since 2014 under the
promotion of the Ministry of Finance (Zhang et al.
2015). The scale of PPPs in China before 2014 was
almost negligible, totaling 428 projects. That number
rapidly increased and almost doubled every half
year, reaching a total of 12,248 by the end of 2016.
Then the sharp expansion halted in mid-2017, when
the central government issued several policies to
control policy risk (see figure 1). After a six-month
clampdown on illegal PPP operation, by early 2018,
a total of 1,695 PPP projects, involving 1.8 trillion
yuan (about US$284 billion) of project finance, had
been terminated (Chen and Yuan 2018).
PPPs in China are defined as long-term contractual
collaborations between the government and societal
capital in the areas of infrastructure and public
Jerry Zhirong Zhao is associate
professor in the Hubert Humphry School
of Public Affairs, University of Minnesota
Twin Cities. He is also a research fellow in
the China Institute for Urban Governance,
Shanghai Jiaotong University, China.
Jie Tan is a PhD candidate in the School
of Public Affairs, Zhejiang University. Her
primary field of research is public-private
partnerships, with a particular interest in
their practice in China.
Stephen E. Condrey
and Tonya Neaves,
Associate Editors

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