Applying public-private partnership to subway construction in China: What is the evidence?

Rapidly growing motorization has led to high levels of traffic congestion and emissions and encouraged large Chinese metropolitan areas to invest in subway developments. The financial burden of these projects, however, far exceeds the availability of public funds. As a consequence, the Chinese government has started to allow lower tiers of government to experiment with Public Private Partnerships (PPP) and private finance to supplement the funding deficit. Analysts often claim that countries have to fulfill certain institutional, macro-economic and other requirements before they can make effective use of PPP. In this article, China's record in meeting those requirements is examined and conclusions are drawn as to where the remaining weaknesses lie. Seven recent PPP projects for subways in five large metropolitan areas in China (Shanghai, Beijing, Shenzhen, Chongqing and Harbin) are investigated empirically. Conclusions are drawn concerning China's current status regarding the use of PPP and the likely prospects for PPP in China in the future.