Regulating Local Government Financing Vehicles and Public-Private Partnerships in China

Hui Jin and Isabel Rial

No 2016/187, IMF Working Papers from International Monetary Fund

Abstract: 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) were 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.

Keywords: WP; PPP project; PPP unit; PPP framework law; investment project; investment unit; fiscal risk; Currency Substitution; subnational government; PPP regulation; PPP contract guideline; government capacity; Public investment and public-private partnerships (PPP); Fiscal risks; Infrastructure; PPP legislation; Africa (search for similar items in EconPapers)
Pages: 32
Date: 2016-09-16
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Citations: View citations in EconPapers (5)

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