This year, the suspension of PPP (Public-Private Partnerships) sparked intense debate in the market.
Recently, the new mechanism was relaunched. Where is the much-discussed PPP headed?
In just a decade, opinions on whether PPP has been a boon or a bane have been flooding in.
From the perspective of local governments, it has, to some extent, helped improve public services and stimulate effective investment.
The benefits of PPP outweigh the drawbacks; the policy itself is sound. As with any policy, there are inevitably pros and cons, and we should focus on its strengths.

Characteristics of the New Mechanism

Today, there is significant public interest in the future of PPP, and there is an urgent need for clarification through national-level policies.
On November 8, the National Development and Reform Commission and the Ministry of Finance issued the "Guiding Opinions on Standardizing the Implementation of the New Mechanism for Public-Private Partnerships."
This document addresses numerous controversies in the PPP sector, marking a return to both the original intent and core values of the initiative .
Under the new mechanism, PPP projects exhibit the following characteristics:
Focus on user-fee-based projects to reduce reliance on fiscal expenditures; adoption of a concession model across the board; prioritization of private enterprise participation; extension of concession terms; and restriction to projects with operational revenue, among others.
Under the new mechanism, PPP projects must strictly prevent the creation of new local government hidden debt. Government support for PPP projects may include:
First, providing government investment support for user-fee projects during the construction phase, specifically through capital injections, which must follow the approval procedures stipulated in the "Regulations on Government Investment."
Second, providing subsidies for operations in accordance with regulations; subsidies for construction costs are not permitted.
Given that the new mechanism imposes revenue requirements on PPP projects and prioritizes private enterprise participation, coupled with long project terms and high uncertainty, as well as the inherent disadvantages of private enterprises in terms of scale, financing, and corporate management, it is foreseeable that the overall size of the PPP market will face significant downsizing in the future.
At this stage, the PPP model also serves as a traditional government investment and financing tool to stabilize government fixed-asset investment. The adoption of the PPP model varies significantly across provinces nationwide.
Currently, some provincial-level local governments treat the PPP model as their preferred government investment and financing tool, while others, due to its complexity, treat it as an alternative option.
At the provincial project repository level, strict vetting procedures are in place. Meanwhile, attitudes toward the PPP model vary across different levels of government; compared to municipal governments, district and county-level governments, constrained by their economic scale, tend to prioritize the use of the PPP model for project planning.

What Are the New Trends?

With the backing of policy documents, what will the trend for PPP look like after 2024?
In the short term, traditional infrastructure and public construction projects will provide stable support and moderately stimulate the economy.
However, as China’s economy transitions toward high-quality and sustainable development, government investment and financing methods must become more market-oriented.
At the same time, the PPP model urgently requires innovation to truly leverage private capital in enhancing the quality and efficiency of public goods provision.
In particular, advancing comprehensive development projects through the PPP model is an area that requires market exploration and innovation to effectively fill the current gap in investment and financing models for large-scale projects faced by local governments.
It is imperative to break the deadlock regarding how to better leverage the policy advantages of the PPP model under the existing institutional framework to promote the implementation of large-scale comprehensive development projects in a market-oriented manner.
Some say that looking back on the ten-year development of PPP, it has been a process of unifying knowledge with action—a process of mutual reflection, entanglement, and transformation between confidence and arrogance, rules and natural laws, and tangible assets and unwavering commitment.
Others say that during this process, behavioral patterns quickly shifted, and the gap between knowledge and action gradually widened.
For example, while it was understood that PPP should not degenerate into a mere financing tool, in practice it soon did just that—a fact tacitly acknowledged by all parties involved; although it was clear that certain fundamental laws of infrastructure investment and financing could not be violated, attempts were made to subvert market principles; and it was even more evident that without stable property, there can be no steadfast commitment —government and enterprises should truly adopt a longer-term perspective, just as in those past pilot concession projects.

A Fresh Perspective

Since late 2013, China’s PPP initiatives have entered a phase of comprehensive promotion.
According to relevant documents from various ministries and commissions, PPP refers to various partnership arrangements formed between the public sector and the private sector to provide public goods and services. The responsibilities and rights of the participating parties are clearly defined through contractual agreements, with risks shared and benefits shared .
1 . Exploration Phase (1980s–2002)
The original intent behind China’s promotion of PPPs was primarily to draw on international experience, introduce private capital and foreign investment into the infrastructure and public utilities sectors, and enhance operational efficiency and management standards.
In 1984, the Shenzhen Shajiao B Power Plant BOT project became China’s first BOT project. During the early exploratory phase, the private sector participants in PPPs were foreign capital.
In the 1990s, China began promoting PPP pilot projects.
In 1993, the State Planning Commission began exploring reforms to the investment and financing system.A year later, the National Development and Planning Commission selected five BOT pilot projects: the Guangxi Laibin Power Plant Project (the first state-approved PPP pilot project), the Chengdu Sixth Water Treatment Plant Project, the Guangdong Dianbai Expressway Project, the Wuhan Junshan Yangtze River Bridge Project, and the Changsha Wangcheng Power Plant Project.
During this phase, private capital began participating in PPP projects as the social partner; however, due to a lack of clear definitions regarding contractual rights and responsibilities and profit distribution, some projects ended in failure.
2 . The Period of Turbulent Development (2003–2013)
In late 2002, the then Ministry of Construction issued the “Opinions on Accelerating the Marketization Process of the Municipal Public Utilities Sector,” followed in 2004 by the “Measures for the Administration of Concessions in Municipal Public Utilities,” which served as the fundamental legal basis for implementing PPP projects during this period.
In 2005, the State Council issued the "Several Opinions on Encouraging, Supporting, and Guiding the Development of Non-Public Owned Economy, Including Individual and Private Enterprises," which once again explicitly stated that "non-public capital is permitted to enter the public utilities and infrastructure sectors."
Driven by these policies, a wave of PPP development swept through major cities nationwide in 2003.
During this phase, the PPP model was most widely applied to wastewater treatment projects, as well as projects involving water supply, subways, development zones, natural gas, and roads and bridges.
At that time, the market-oriented nature of PPP project operations was very evident: foreign enterprises, private enterprises, and state-owned enterprises competed on an equal footing, often participating in PPP projects as consortia.
In 2008, the “4 trillion yuan” economic stimulus plan was launched, and public infrastructure construction was primarily carried out through local government investment and financing platforms, resulting in a significant decline in PPP projects.
3 . Comprehensive Promotion Phase (Late 2013–2017)
The PPP model, as an innovative reform of government investment and financing mechanisms, began to be comprehensively promoted and developed, with the proposal to “allow social capital to participate in urban infrastructure investment and operations through concession agreements and other means.”
Since 2014, a series of notices, operational guidelines, contract management standards, and financial support measures promoting the PPP model have been issued.Local finance departments established dedicated units to coordinate efforts, and multiple provinces introduced new regulations to vigorously promote the PPP model, launching PPP demonstration projects.
Upon entering the comprehensive promotion phase, the Ministry of Finance and the National Development and Reform Commission (NDRC) assumed joint oversight, with each responsible for PPP projects in the public services and infrastructure sectors, respectively. Both agencies established their own PPP project databases: the Ministry of Finance’s PPP Project Database and the NDRC’s PPP Project Promotion Database .
4 . Standardization and Development Phase (Late 2017–2023)
Upon entering the standardization and development phase, from 2018 to 2019, the number of PPP projects and total investment saw a slight decline due to the cleanup and reorganization of the PPP project databases, followed by modest growth after 2020.
With the release of this document, 10 years after the full-scale promotion and development of PPP, China’s PPP sector has entered a brand-new phase of development.
Precisely for this reason, after returning to basics, it is the fundamental concepts and principles embodied by PPP—along with the market environment it requires and cannot do without—that represent the areas and directions worthy of our renewed understanding and practical implementation.