China has taken steps to restrict the number of public–private partnerships (PPPs) entered into by local government bodies, citing their role in rising debt.
Sources familiar with the matter told the Reuters news agency that a 10% budget spending limit for PPPs would be replaced by a central vetting mechanism, and that PPPs that had not found an investor before February would be suspended.
The State Council, the highest organ of the Chinese state, asked local government bodies to halt “problematic projects”, such as those in which their own special purpose vehicles posed as the private partner, thereby spurring excessive debt accumulation.
China News Service stated that future PPPs should be clearer about their costs. The IMF says that there was $12.6 trillion of local government debt in 2022, up 62% from 2019.