Private participation in China's wastewater service under the constraint of charge rate reform

Abstract

China is moving towards a market-based economic system, which includes the water sector. The state is emphasizing tariff reform of the water sector, which is a necessary step in the transition to a market economy, and also an important step for China's wastewater management. With the gradual increase of wastewater service charges, more private investment is attracted to participate, which leads to a decrease in the proportion of direct public investment. This paper develops a model to quantitatively analyse the dependence of private investment on the scale of public investment at different rate levels of wastewater treatment charge. In the meantime, the impacts caused by tax policies on rate level and private sector participation are analysed. In terms of the survey regarding the marketization reform process of the wastewater sector, a summary of the current major public-private partnership (PPP) approaches in China is given in this paper, which reveals that the strategy option also depends on the rate level of the wastewater treatment charge. As a consequence, the government has to keep a greater investment ratio to initiate the market and induct private investment, particularly because the current WWTC rate is at a low level. Furthermore, the BOT-type option is, and still, could be a major form of PPP in China for a while due to the constraint of the current low rate level of the wastewater treatment charge. © IWA Publishing 2006.