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 1990s the road network expanded by more than 40 per cent, water production grew by more than 50 per cent and China became 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 about 10 per cent of total investment in infrastructure. Meeting the demand for cheaper, more reliable and more efficient infrastructure services requires more than 75 billion a year in infrastructure investment over the first decade of the 21st century. Increasing the participation of the private sector - domestic and foreign - is an obvious policy option. Well-designed public-private partnerships can reduce the fiscal burden on public agencies and improve the targeting of subsidies to poor people, students, the elederly and other disadvantaged groups. This report seeks to improve China's approach to 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.