RISK MANAGEMENT PRACTICE IN CHINA'S PUBLIC-PRIVATE PARTNERSHIP PROJECTS

Yongjian Ke,Shouqing Wang,Albert P C Chan

doi:10.3846/13923730.2012.723380

Abstract

Project risks were not properly managed in the many past Public-Private Partnership (PPP) projects in China. Although numerous research studies have been conducted on risk management in China's PPP projects, the realization of risk management in China's construction industry especially in PPP projects with high risk exposure and complicated contract structure has hitherto not been well studied. This paper therefore attempted to examine the current use of risk management in China's PPP projects by an empirical survey. The results indicated that the use of risk management was inadequate; qualitative risk analysis methods were preferred to quantitative and semi-quantitative methods; risk management usage in the execution was found to be much higher than in the planning, conceptual or termination stage; interviewees were unfamiliar with most of the risk identification and assessment tools. All above could be partly due to the project nature, but more fundamentally due to the local industrial culture. The absence of risk management culture was found to be the dominant factor which limited the implementation of risk management in practice. Recommendations to alleviate the difficulties of risk management were thereafter provided in this paper.

Highlights

IntroductionPublic-Private Partnership in China Public-Private Partnership (PPP) modality was adopted to relieve the Chinese government’s budgetary pressure in infrastructure construction and development, which was first introduced by local governments in 1980s
Research methodology In light of the lessons learnt from past Private Partnership (PPP) projects, this study developed an empirical survey to collect feedback from practitioners on the following aspects of risk management in China’s PPP projects
The maximum score by the interviewees regarding the level of their training in risk management was 3, which yet again reinforces the lack of risk management culture in

Summary

Introduction

Public-Private Partnership in China Public-Private Partnership (PPP) modality was adopted to relieve the Chinese government’s budgetary pressure in infrastructure construction and development, which was first introduced by local governments in 1980s. At the end of the decade to cope with the adverse influence of the financial crisis in Asia, the central government invested huge amounts of treasury bonds in infrastructure, and was determined to clean up the unregulated or illegal projects, which led to a termination of the first round of private investment (Shen et al 2005). Only 1.18 trillion came from the central government, and the rest would have to be topped up by the local government, and/or the private sector (NDRC 2009). Since most of the local governments were still subject to severe budgetary pressure, there was a heavy reliance on the private sector investment. The second boom of private investment in infrastructure development appeared (Ke et al 2009)

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