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

September 16, 2016

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Format: Chicago

Hui Jin, and Isabel Rial. Regulating Local Government Financing Vehicles and Public-Private Partnerships in China, (USA: International Monetary Fund, 2016) accessed December 24, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Expenditure, Fiscal risks, Infrastructure, National accounts, PPP legislation, Public debt, Public financial management (PFM), Public investment and public-private partnerships (PPP)

Keywords: Africa, Currency Substitution, Fiscal risk, Fiscal risks, Government capacity, Infrastructure, Investment project, Investment unit, PPP contract guideline, PPP framework law, PPP legislation, PPP project, PPP regulation, PPP unit, Public investment and public-private partnerships (PPP), Subnational government, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/187
Stock No:

WPIEA2016187
ISBN:

9781475536768
ISSN:

1018-5941

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