Public-Private Partnerships in China: On 2014 as a landmark year, with past and future challenges (Discussion Paper)

This paper discusses the context and the recent developments of public-private partnerships (PPPs) in the People’s Republic of China and provides recommendations to harness the full potential of these procurement arrangements.

2014 might prove to be a landmark year for the development of PPPs in China. Many formal steps have been taken in this direction by leading institutions in this area, such as the State Council, the National Development and Reform Commission and the Ministry of Finance. In its first section, this paper describes the main drivers for PPPs in China in the contemporary context, which is to say the high level of local government debt and the daunting funding needs for new infrastructure in the coming decades. This paper also details relevant government documents and recent decisions. The second section discusses some important barriers that might prevent the development of sound and successful PPP projects. The third and last part provides recommendations to fully take advantage of the PPP approach to infrastructure procurement. We are of the view that such agreements should not be considered as a mere source of financing. Instead, value for money should be carefully assessed considering the whole life cycle of assets. Suggestions to establish performance-based specifications and mitigate political and regulatory risks are also provided.