PPP application in infrastructure development in China: Institutional analysis and implicationsby Shuibo Zhang, Ying Gao, Zhuo Feng, Weizhuo Sun

International Journal of Project Management


de i , s, T vised

Infrastructure is considered to be “life supporting services” (Garvin and Bosso, 2008; Koch and Buser, 2006), and good governance is an important factor for the success of PPP 5000 billion RMB e are unlikely to be ts and so, reforms nment regarding the

Available online at www.sciencedirect.com


International Journal of Project Managemen

JPMA-01662; No of Pages 13infrastructure facilities. Public–private partnership (PPP), as an innovation of project delivery alternatives, has been widely applied in many countries in the past two decades, attempting to resolve the problems (Chan et al., 2011); now it is, arguably, century are expected to be around 3500– (Wu, 2007). Funds from government alon available to finance such large investmen need to be undertaken by the Chinese gover(Noel and Brzeski, 2005) and has long been under the monopoly of government. However, insufficient infrastructure has been a problem for almost all countries; this problem is exacerbated by the lack of funds available in the public sectors (Matos-Castaño et al., 2014; Qiu and Wang, 2011). Further, the monopoly of government over infrastructure has been seen as a cause of low efficiency in the development and operation of projects in terms of developing sound economic policy and administrating projects (Li et al., 2005).

Over the past two decades, the Chinese government has been embarking on an ambitious programme of large investments on infrastructure development. To facilitate urbanization in China, the funds required for urban infrastructure development during the first 20 years of the twenty-firstPublic–private partnership (PPP) has been applied more and more widely for the past two decades. Questions still remain as to how to cultivate a facilitating institutional environment for developing PPP projects success. This paper examines such a question, focusing on the institutional analysis of the Chinese context. A theoretical framework of PPP governance is first developed, identifying the logics and interactions of the differentiating levels in the PPP system. Then, the institutional framework of China is presented with regard to its cultural, legal, and administrative characteristics, as the embeddedness of PPP development. Thereafter, the evolution of Chinese institutions with particular regard to PPP is analyzed. Findings show that changes in the institutional arrangements have to go in tandem with introduction of PPP, and performance of PPP is closely related with its institutional environment. Suggestions are put forward to enhance China’s institutional arrangements for healthy PPP promotion, and the implications for governments and investors in other countries are described. © 2014 Elsevier Ltd. APM and IPMA. All rights reserved.

Keywords: Public–private partnership; Infrastructure; Institutional arrangements; China 1. Introduction the most significant, worldwide trend in the public sectorPPP application in infrastructure

Institutional analysis and

Shuibo Zhang ⁎, Ying Gao

College of Management and Economic

Received 16 December 2013; received in re

Abstract⁎ Corresponding author at: College of Management and Economics, Tianjin

University, 300072, Weijin Road 92, Tianjin City, China. Tel.: +86 22 27401083; fax: +86 22 27401136.

E-mail addresses: zhangshuibo@tju.edu.cn (S. Zhang), ygao@tju.edu.cn (Y. Gao), fengzhuo1028@hotmail.com (Z. Feng), 5xmswz82@163.com (W. Sun). http://dx.doi.org/10.1016/j.ijproman.2014.06.006 0263-7863/00/© 2014 Elsevier Ltd. APM and IPMA. All rights reserved.

Please cite this article as: S. Zhang, et al., 2014. PPP application in infrastructure de http://dx.doi.org/10.1016/j.ijproman.2014.06.006velopment in China: mplications

Zhuo Feng, Weizhuo Sun ianjin University, Tianjin City, China form 8 June 2014; accepted 12 June 2014 www.elsevier.com/locate/ijproman ct t xx (2014) xxx–xxxinvestment and financing of infrastructure projects. PPP was thus introduced in China to alleviate this problem (Chan et al., 2009; Feng and Luo, 1999; Ge and Zhang, 2009; He, 2001;

Wang, 2006). In fact, PPP, in its modern form, was applied in

China in the late 1980s, first in industrial development projects, and later other sectors, particularly infrastructure. According to velopment in China: Institutional analysis and implications, Int. J. Proj. Manag. 2 S. Zhang et al. / International Journal of Pthe World Bank (2013),1 the total number of infrastructure projects with private participation from 1990 to 2012 reached 1064 in China, ranking first worldwide, with a total investment commitment being 119,330 million US dollars, ranking fourth worldwide, after Brazil, India and Russian Federation.

China is characterized by unique political, economic and cultural features (Buderi and Huang, 2006; Mu et al., 2011; Tan and Bian, 2013). Before the 1980s, China adopted a pure socialist economy, highly centralized and planned. Infrastructure investment and development was the sole responsibility of the government. With the introduction of PPP in its infrastructure development, and considering the complexity of such economic transactional activities, the PPP practice in China has become a focus of study by scholars in recent years, particularly with regard to PPP risks (e.g. Cheung and Chan, 2011; Ke et al., 2010; Song et al., 2013; Wang et al., 1999),potential problems(e.g. Chan et al., 2010a), critical success factors (e.g. Chan et al., 2010b; Zhao et al., 2010) and case studies intending to draw lessons and experience from the implementation of real PPP projects (e.g., Chen, 2009; Chen and

Hubbard, 2012). These studies offer us a better understanding of the current status, problems and constraints encountered in

PPP projects in China. They also suggest or imply that sound institutions are very important for PPP success and that there is a need for China to create a PPP-enabling institutional environment (Wang et al., 2012). However, our literature review shows that there still exists a lack of systematic institutional analysis, especially from the dynamic evolution perspective, to address the following question: how have China’s institutional arrangements evolved to accommodate the new project financing and delivery approach in infrastructure development?