Cost-Saving or Cream-Skimming? Partner Ownership and the Project Returns of Public-Private Partnerships in China

Public-private partnerships (PPP) are often regarded as a means of reducing costs through the extensive involvement of private capital. Many PPP projects in China, however, are led by state-owned enterprises (SOEs). This article investigates whether SOE-led PPP projects lead to higher costs compared to those led by private partners in the Chinese context. Based on a dataset containing 1267 PPP projects related to the period 2014–2019, that attracted government funding, we estimate the impact of partner ownership on project returns. The internal rate of return averages out at approximately 8.6% for China’ PPPs, which is comparable to those located in the United Kingdom. In general, projects led by SOEs appear to have lower returns compared to those led by private enterprises. When the contract values are large, however, SOE-led projects incur higher costs compared their counterparts. These findings reveal subtle and mixed results regarding SOE participation: these “public-public partnerships” could be either cost-saving or cream-skimming, depending on the specific project’s context.