Open AccessRegulating local government financing vehicles and public-private partnerships in China
Author(s) -
Hui Jin,
Isabel Rial
Publication year - 2017
Publication title -
journal of infrastructure, policy and development
Language(s) - English
Resource type - Journals
eISSN - 2572-7931
pISSN - 2572-7923
DOI - 10.24294/jipd.v1i2.67
Subject(s) - china , pillar , finance , business , order (exchange) , government (linguistics) , public–private partnership , general partnership , engineering , linguistics , philosophy , structural engineering , political science , law
In this paper, we argue that there is much room for China to strengthen its regulatory framework for public-private partnerships (PPPs). We show that infrastructure projects carried out through local government financing vehicles (LGFVs) are largely unregulated PPPs, and significant fiscal risks have already manifested themselves. While PPPs can potentially provide efficiency gains, they can also be used by governments to circumvent budgetary borrowing constraints. Therefore, effective PPP regulation is key to delivering PPPs’ benefits while containing their potential fiscal risks. The authorities have taken concrete steps in order to establish a sound regulatory framework and foster a new generation of PPPs. However, to make the framework effective, we highlight a few issues to be resolved. Based on international best practice, we propose a four-pillar regulatory framework for China, which could be implemented gradually in three stages.