Research And Analysis About Applying PPP Mode To Infrastructure In China

The rapid economic development has accelerated the urbanization process and boosted demands for public infrastructure in China. However, growth of fiscal revenue has been slowing down in recently years while local debt grows on a large scale, which makes it more and more difficult for government to invest in public infrastructure construction alone. Besides, the high cost and low efficiency of public goods and services supply have attracted extensive public attention. It is therefore the primary task to find a proper way for infrastructure investment and financing.According to the 《Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform》 the underlying issue is how to strike a balance between the role of the government and that of the market, and let the market play the decisive role in allocating resources and let the government play its functions better. PPP is the abbreviation for Public Private Partnership. It means to take advantage of both public and private sectors, in order to improve the supply of public infrastructure while reducing government expenditure, thus contributing to better resource allocation and optimizing social welfare. In the current situation, PPP has strengths in broadening the source of funds, alleviating financial pressure, resolving local debt risks, pushing forward the transformation of government functions, improving the fund use efficiency and public goods supply benefits, thus making it one of the best choices of financing policy of infrastructure construction.This thesis sets out from public goods theory, government failure theory, principal-agent theory and project distinguish theory, gives a brief introduction of PPP’s essence, characters, advantages and functions by using varies research methods. Some examples of PPP projects home and abroad are to be discussed, and based on the reality of China and certain experiences from other four countries, certain policy proposals are made to improve the construction of government, institution and project, which should follow the principles of combining top-level design and "crossing the river by feeling for the stones", and letting the market play the decisive role in allocating resources while the government plays its functions better.