Private Participation in Infrastructure in China : Issues and Recommendations for the Road, Water, and Power Sectors

Infrastructure has played a major role in China's rapid development. Over the past decade the road network expanded by more than 40 percent, water production grew by more than 50 percent, and China has become the world's second largest energy producer. However, foreign direct investment in infrastructure accounts for a small share of foreign direct investment flows and for only 10 percent of total investment in infrastructure. Meeting the demand for cheaper, more reliable, and more efficient infrastructure services will require more than US$75 billion a year over the next decade. Increasing the participation of the private sector, domestic and foreign is an obvious policy option. Public-private partnerships can reduce the fiscal subsidies on public agencies and improve the targeting of subsidies to poor people, students, the elderly and other disadvantaged groups. This report reviews China's current framework for private participation in infrastructure. It also compares China's experiences with those of other countries, providing legal, regulatory, and financial framework recommendations as well as sector-specific suggestions.