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.