A Study On The Relationship Between The Entry Of Private Capital And The Efficiency Of Municipal Public Utilities

China’s central and local government both considers leading the private capital into the public service industries such as urban water supply sector, as an indispensable way to improve the industry efficiency. However, for the topic of the efficiency problem, it lacks of the quantitative measurement of the industry efficiency as well as the systematic thinking of the connection between the efficiency improvement and private capital’s entry. This study uses urban water supply industry as a sample. Based on the data envelopment analyses (DEA) and tobit model, this paper reviews the current situation of private capital’s entry and analyses the cross-section data of269Chinese cities in2009, measuring the efficiency scores of urban water supply and exploring the impact of private capital on the water industrial efficiency. The results show that:the overall technical efficiency of urban water supply is relatively low, which is mostly caused by the pure technical efficiency. No cause-effect connection between industry efficiency improvement and private capital’s entry has been proved. It’s the level of the competition within the industry and internal efficiency of the business entities that have profound effects on the industry efficiency. As the basis of the achievement of the above two conditions, a transparent and equitable market must be established first. The ideal path to build such market should include setting boundary between profitable and public nature, enhance the restructuring of state-owned enterprises and improve government’s regulatory capability.