The Role of Public–Private Partnerships in Local Government Debt Is a Potential Threat to Sustainable Cities: A Case from China

Abstract

(1) Background: Public–private partnerships (PPPs) play an essential role in sustainable cities and are widely applied in the public environment, health, and transportation sectors. One of the main functions of PPP projects is to attract private capital to provide better public services and infrastructure. PPP projects require government investment, potentially threatening the debt of local governments. However, few scholars have shown attention to the relationship between PPP projects and local government debt. (2) Methods: Therefore, this study selects data from 36 cities in China from 2014 to 2018. Ordinary least squares (OLS), quantile regression, and placebo tests are used to investigate this claim. (3) Results: This study finds that PPP projects can affect local governments’ debt; based on this result, this study further proposes that the effect of PPP projects on local government debt has regional heterogeneity. Compared with eastern regions, PPPs in central and western areas of China have a noticeable impact on local government debt. This study also investigates the effect of different types of PPP projects on local government debt. In terms of the number of new additions, comprehensive urban development PPP projects have the largest effect on the exacerbation of government deb. In terms of the amount of new investment, environmental protection PPP projects have the greatest exacerbating effect on government debt. (4) Conclusion: These findings try to identify PPPs’ effect on local government debt. It is of potential reference for sustainable cities and helps to provide better transport, environmental, and health public services.

Can Local Government Debt Decrease the Pollution Emission of Enterprises?—Evidence from China’s Industrial Enterprises

“…While achieving economic growth, it will also provide more job opportunities and attract more residents. Therefore, under the influence of the assessment and promotion system for local government officials, to achieve economic growth, local government officials will resort to a large amount of debt to achieve rapid economic growth [36][37][38]. Due to the competition brought about by fiscal decentralization in both aspects, local government debt will rapidly expand, and it will also lead to a large amount of infrastructure construction [39][40][41], consuming a large number of building materials and natural resources.…”

Assess the social and environmental consequences of PPP projects, including their sustainability and contribution to the United Nations sustainable development goals (SDGs)

“…The study also emphasizes the need for an accountability mechanism to ensure that the public sector acts in accordance with the public interest. The findings of the study aim to guide PPP stakeholders in Albania on the CSFs for successful PPP implementation (Fu et al, 2022) [14] examine the relationship between public-private partnerships (PPPs) and local government debt in China, focusing on the impact of different types of PPP projects on government debt. The study finds that PPP projects can affect local government debt, with a noticeable impact in central and western regions of China.…”