LAUSR

Many localities in China are faced with an outdated, segmented infrastructure system and a shrinking budget. However, the state‐led promotion of Public–Private Partnerships (PPPs) in China is providing an innovative solution. This paper looks at financing innovations in China such as industrial funds and asset‐backed securitisation for PPP projects. Particularly, this paper empirically studies the characteristics of project revenue bonds and PPP asset‐backed securities (PPP–ABS) in China. The study finds that the majority of social investors remain state‐owned enterprises (SOEs) and returns on whole business securitisation (WBS) of projects could vary with the volume issued and the credit of the company. Securitisation not only solves the problem of limited source of financing, but also improves the efficiency of management. While securitisation of PPP projects can succeed in tapping social capital to invest infrastructures, the banking system should handle with caution the credit risk and default risk caused by rising leverage of PPP special purpose vehicles (SPVs).