Public-private Partnership In High-speed Rail Financing:Case Of Uncertain Regional Economic Spillovers

The opening of high-speed rail can change the transportation pattern,improve connectivity between regions,affect the economic development of each region,and thus produce economic spillover effects.But the nature（i.e,benefiting or harming regional economies）and the magnitude of the economic spillover effects are both uncertain,which brings risks to the government’s decision on the investment of high-speed rail.In addition,high-speed rail construction is very expensive and requires a large amount of investment,which also brings a considerable financial burden to the government.In order to reduce the fiscal burden faced by the government and reduce the risk from the uncertainty of the economic spillover effects of high-speed rail,the public-private-partnership（PPP）mode is destined to be the first choice through the investment in high-speed rail.Considering the uncertainty of regional economic spillover effects in high-speed rail investment,this thesis establishes a mathematical model of public-private partnership（PPP）for high-speed railway investment,taking the participation degree of the private enterprise as the decision-making variable and the maximization of social welfare as the objective function.By solving the model,the optimal decision of the government is obtained,that is,the proportion of optimal investment of the private enterprise in the publicprivate partnership mode.Then it analyzes how the first moment（average）and second moment of the economic spillover effects affect the government’s optimal decision.Finally,the model is further extended to build-operate-transfer（BOT）mode by considering the concession period.In the study,it is found that,in the public-private partnership mode,the government hopes to stimulate the traffic of high-speed rail to expand the economic spillover effects when the first moment of regional economic spillover effects is high,which induces the profit shared by the private enterprise will decline.In order to ensure the participation of the private enterprise in the public-private partnership mode,the government needs to provide a higher share of private investment so that the private enterprise can get more profits from the operation of high-speed rail.That is,the proportion of optimal investment of the private enterprise increases with the increase of the first moment of the economic spillover effects of high-speed rail.When the second moment of economic spillover effects is high,from the perspective of risk sharing,high-speed rail investment implies a higher risk of investment return.Therefore,the government will increase the share of investment by the private enterprise in order to distribute more investment risk to the private enterprise.That is,the proportion of optimal investment of the private enterprise increases with the increase of the second moment of the economic spillover effects of high-speed rail.However,when the first or second moment of economic spillover effects is too high,the government may choose not to adopt the public-private partnership mode,but to invest the high-speed rail project by himself.Because,in this case,the public-private partnership mode requires too much private ownership,which severely reduces social welfare.Then,by using the obtained research results,this thesis explains why China has only adopted the public-private partnership mode for high-speed railway investment in the eastern and coastal areas,but not in the central and western regions.