Does Government and Social Capital Collaboration Truly Stimulate Private Capital Investment? — A Study Based on PPP Project Data

The Public-Private-Partnership (PPP) model is a collaborative mechanism for governments and social capital to provide infrastructure and public services. According to the raw data of PPP projects, government capital accounts for only about 0.1%, with the rest coming from social capital.

Social capital is not merely made up of private capital; state-owned enterprises (SOEs) can be considered as part of social capital. An important purpose of setting up PPP projects is to guide the direction of social capital investment, stimulating vitality in private investment. The success of a PPP project in stimulating private investment should be evaluated based on the proportion of private capital in the PPP project, not the proportion of social capital. Through equity penetration of companies participating in various PPP projects and identification of state-owned shareholders, I found that the actual proportion of private capital in PPP projects is only about 35%. In other words, most of the social capital in PPP projects comes from SOEs.

I constructed an equity penetration diagram for the 20,295 companies that have participated in PPP projects and calculated the equity similarity and closeness of companies involved in the same PPP project.

Through randomly extracting companies from the database within the same province and industry, calculating the proportion of state-owned capital, and marking whether they won the bid, I constructed a dataset. After controlling for registered capital and regional fixed effects, the results show that companies with a higher proportion of state-owned capital are more likely to win bids. Companies with stronger equity ties to the tenderer are also more likely to win bids. This suggests that PPP projects that largely adopt “public bidding” may prefer SOEs, or there might be collusion, which means the bidding is not fair.

In addition, after controlling for total project investment, cooperation period, provincial enterprise income tax revenue (measuring the amount of private capital), and provincial general public revenue (measuring the amount of state-owned capital), and adding regional and year fixed effects, I found that the proportion of state-owned capital in projects of companies participating in the same PPP project is positively correlated with provincial general public budget income and total project investment, but negatively correlated with enterprise income tax revenue and cooperation period. According to the interaction term coefficient of provincial transfer payments and regions, we found that the more transfer payments western provinces (such as Yunnan and Guizhou) receive, the higher the proportion of state-owned capital in PPP projects. This implies that in areas where private capital is more active, PPP projects can better stimulate private capital investment, SOEs get larger PPP projects, and the transfer payments received by the western regions may be used for the construction of PPP projects.

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