Research on Sustainability of Financing Mode and Demand of PPP Project—Based on Chinese PPP and Local Financing Platform Alternative Perspective

Abstract

This paper studies the sustainability of the financing model in China’s urbanization and the demand of local governments for PPP projects. Based on the integrated panel data of PPP, local investment and financing platforms, urban investment bonds, and local economic statistics, the fixed effect model and dynamic panel regression model are used to study whether local financing platforms promote economic growth. The results show that in general, the development model of financing platform is not conducive to sustainable economic development. Before the 2008 economic crisis, local governments were pushing up house prices through financing platforms which boosted economic growth, but after the 2008 economic crisis, this mechanism did not work. Therefore, the sample selection model is used to predict the demand of local PPP projects and verify the substitution relationship between local financing platforms and PPP. The study found that financing platforms hinder local government demand for PPP projects and the attraction to private investment. After adjusting the relevant variables to zero, the demand for PPP projects in a representative city is 3.46.