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Public-Private-Partnership: the Breakthrough Point of Reform for Public Service Systems and Mechanisms


By Liu Shangxi, Research Institute of Fiscal Science, Ministry of Finance & Zhao Fujun, Associate Research Fellow of the Research Department of Foreign Economic Relations, DRC

China is currently implementing the Public-Private-Partnership (PPP)model. During the 13th Five-Year Plan period, China will witness a tightened fiscal operation and it is therefore necessary for the government to leverage the market and non-governmental entities to jointly offer public services. Consequently, PPP will be the normal model for public service supplies. On one hand, the normal and tightened fiscal operation has made it necessary for the government not to take the leading position for public service supplies; on the other, solely by relying on government investment cannot meet the increasing demand for public services. Applying the PPP model can enhance efficiency and facilitate reform. 1. Public service supplies will become more efficient. 2. Resources will be mobilized on a more extensive scale. 3. Resource distribution model will become more delayered and streamlined. And 4. All participants will act on a more equal footing. In implementing the PPP model, the government should play an equal part and is not allowed to use its administrative power. PPP serves as a breakthrough for reform of public service systems and mechanisms as well as a process for governing the micro-basis of reform. To make PPP a third model for mobilizing and distributing resources and promoting reform of input, operation and supervision for public services, the government should change its function and take the responsibility for risk sharing. The relationship between government and market or between government and non-government entities should be addressed in accordance with the principle of common sharing of risks and interests. The key to deepening cooperation between government and non-government capital is to lower uncertain risks as uncertainties and risks mark the core factor affecting the effort to form and preserve cooperation between government, market and non-government entities. We should therefore accelerate the building of the rule of law and institutionalization so as to reduce uncertainties and risks in PPP implementation and at the same time quicken steps to create a policy and system environment for further developing the PPP model.

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