The rise and fall of Public–Private Partnerships in China: a path-dependent approach

Abstract

Due to growing traffic demand, enormous investment requirements and high fiscal pressures, China has witnessed a reshaping of financing policies in large transport infrastructure projects from public financing to Public–Private Partnerships. As a result, the provision of transport infrastructure services in China has been steadily moving from the realm of government to that of private sector. In the same period, governments at the central and regional levels were actively engaged in this institutional transition by devising corresponding policies and enacting new laws and regulations. However, in late 2009 it became clear to the authors of this article that there has been a tendency of rolling back private participation in transport infrastructure and service because of various forms of opportunistic behavior on the part of some private players and malpractices among some governmental officials in their interaction with private players, and in relatively recent a number of large transport projects have been granted to state-owned enterprises. Therefore, the purpose of this article is to analyze and explain the processes of rise and fall of Public–Private Partnership in China. We argue that the adoption of Public–Private Partnership in China is a path-dependent process rather than some economic optimum advocated by a variety of international organizations. Specifics of wider Chinese political, cultural and institutional context are recognized as important factors that influence the performance of Public–Private Partnership. Effects of decisions made under transitory conditions can persist long after those conditions have vanished. In addition, these historical legacies are important in understanding contemporary use of Public–Private Partnership in China, and they are also the origins from which the sub-optimal statuses are often led.