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Private Sector Participation and Performance of Urban Water Utilities in the People's Republic of China

Author

Listed:
  • Jiang , Yi

    (Asian Development Bank)

  • Zheng, Xiaoting

    (Asian Development Bank)

Abstract

In the early 1990s, the People’s Republic of China opened its urban water sector to nonstate capital to help meet increasing urban water demand under severe water resource constraints. By 2007, more than 30% of urban water utilities had attracted private sector participation (PSP). To understand the factors that drive PSP in urban water supply, and to answer the key policy questions whether PSP has boosted investment and improved the efficiency in water supply, we assembled and analyzed a unique dataset consisting of more than 200 urban water utilities covering 1998–2007. Our estimations indicate that, except for the utility’s profitability and urban road infrastructure in the prior year, the characteristics of the utility or city were not strong drivers of PSP. One interpretation is that private investors participating in this newly opened sector were less concerned with short-term factors. For utility performance, we find that PSP has reduced employment, has lowered managerial expenses relative to sales revenues, and has increased profitability significantly, in both the economic and statistical sense. PSP has positively affected utilities in other ways, although the estimates are not statistically significant. Further analysis indicates that most of the changes occurred in utilities with private shareholders in the majority rather than the minority.

Suggested Citation

  • Jiang , Yi & Zheng, Xiaoting, 2010. "Private Sector Participation and Performance of Urban Water Utilities in the People's Republic of China," ADB Economics Working Paper Series 237, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0237
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    Citations

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    Cited by:

    1. Fan Li & Michelle Andrea Phillips, 2017. "The Influence of the Regulatory Environment on Chinese Urban Water Utilities," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(1), pages 205-218, January.
    2. repec:eee:resene:v:50:y:2017:i:c:p:105-123 is not listed on IDEAS
    3. Lan, Jing & Munro, Alistair & Liu, Zhen, 2017. "Environmental regulatory stringency and the market for abatement goods and services in China," Resource and Energy Economics, Elsevier, vol. 50(C), pages 105-123.

    More about this item

    Keywords

    urban water supply; water utilities; private sector participation;

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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