Risk management of PPPs in China: A case study of Guangzhou

Abstract

Over the past decade, Public Private Partnerships (PPPs) have become more prevalent in public infrastructure construction projects worldwide. China is not an exception. Due to the slowdown of its national economy, China faces daunting challenges in matching its fiscal capacity with the fast-growing demand for public services. PPPs create a fiscal space for China to mitigate its debt risks and maintain local sustainability. This study uses the Datianshan Project in the city of Guangzhou as a case to examine the local experience of PPPs. However, in this case, the PPP did not reduce environmental or fiscal risks. And it certainly did not lead to a relaxation of the city's revenue constraints. What the Datianshan project did show was the need for local tax reform that would allow PPPs to move on to the next level of usefulness.