People First in the PRC

An interview with Professor Yongheng Yang, Tsinghua University By Eric Collins

Professor Yongheng Yang is Associate Dean, School of Public Policy and Management, Tsinghua University, whose areas of research include Government Performance, and Public Service Delivery. In this interview, he talks about People First Public-PrivatePartnerships in China especially as they may relate to healthcare, Hong Kong's niche in the Belt and Road (B&R) Initiative, and the role of Tsinghua University and City University of Hong Kong in delivering specialist educational courses. Professor Yang is recipient of the first CityU College of Business Distinguished Alumni Award.

Professor Yongheng Yang

Will PPPs really put people first in China?

Public-Private-Partnerships are a joint effort between the public and private but what they provide are fundamentally public goods. So, they must be delivered according to the needs of the people, and that's why we have to put the people first. If they cannot satisfy the needs of the people, that would be an inefficiency. And if the service is just for profit, we sacrifice the interests of the people.

How to put the people first?

Citizen participation is very important for identifying and incorporating people's needs into public service design, but is often overlooked in mainland China PPP projects. There is a need to focus not just on the means of public service delivery, but on the targets that public service wants to achieve. Why are we building the infrastructure? Who are we trying to serve? Another issue is the environment. In the long term, how can PPPs be sustainable?

The aim of PPPs should be to raise the efficiency and quality of public services, and finally satisfy the needs of the people. We need to think about what role government should play in the operation. Is there enough citizen participation in the operation of the projects?


How standardized should PPPs be?

Currently many PPPs are not standardized in mainland China. As China PPPs go global, there is a major job to be done in training. This involves project specification, talent training, including target audiences of entrepreneurs and government officials in the B&R regions. This is where the work of Tsinghua University and CityU plays a role in coordination with the UNECE.

Are PPPs primarily infrastructure projects?

In the early stages, this has been the case. But with the transformation of the government role into both hard and soft infrastructure, healthcare, education, and even some governmental services such as the prison service and inspecting systems of public infrastructure, can be farmed out to private companies.

How important is the regulatory role?

Information asymmetry is greater in soft infrastructure projects, because most public service is intangible and it is very hard to measure the service output. So, it is more difficult for government to monitor delivery of these services. That's why most successful PPP projects up to now have been hard infrastructure.

How to prioritize the selection of PPP projects?

Common themes of PPPs are the sharing of risk and the development of innovative, long-term relationships between the public and private sectors. The nature of the private sector is to make profit in a rapid way, but that of the public sector is to provide public goods and satisfy public needs. The conflicting pursuits of the two partners have to be addressed carefully in the design of PPPs. There should be a balance between different aspects. Between profit and public interest. Between short and long-term. And between the project itself and the environment.

Guangshen Expressway connecting the cities of Guangzhou, Dongguan and Shenzhen opened in 1997, and was one of the first China PPPs © Hopewell Holdings Limited


How to set standards for sustainability?

The UN Sustainable Development Goals should be the guiding standards. Countries surrounding B&R are much differentiated, so it is difficult to set one universal standard, but the SDGs will be helpful for countries to design project specifications.

What sort of People First PPPs will we see?

PPPs have to enhance the efficiency and equitability of access to the projects. Healthcare, for example, is a basic need for the people, but private companies are of course for-profit. So, there is a need to make a balance between the two. If we don't have robust laws to monitor and regulate the private delivery of healthcare services, it will be a disaster.

Why is current public healthcare not sufficient?

Between the patient and the doctor, the information asymmetry is very high. With heavy information asymmetries in healthcare services, physicians can generally cover up things such as over-prescription and convince patients of the appropriateness of their diagnosis and treatment, compromising both their professionalism and integrity. This places a huge burden on patients. Secondly, there is a monopoly in this sector. In China, healthcare is dominated by public hospitals, meaning less competition and low efficiency. So, the involvement of the private sector is helpful for stimulating the competition between the two sectors.

Does that create separate healthcare systems?

The target customer of the private hospital is mainly the rich minority. Then there are the public hospitals. But there is a third category of hospitals that are NGOs or not-for-profit. Developing PPPs in this sector will stimulate competition. The challenge in China is that the most qualified doctors as well as the highest quality resources are controlled by the public hospitals. But now we can see a hybrid model emerging in most developed economies, where more doctors are working part-time in private practice.

Education, health, infrastructure inspection - areas that may become privatized in China Photo courtesy of Adam Gorlick / Stanford News Service
Education, health, infrastructure inspection - areas that may become privatized in China ©RM Imaginechina
Education, health, infrastructure inspection - areas that may become privatized in China ©RM Imaginechina

Hong Kong

What is Hong Kong's role in the B&R Initative?

Hong Kong has many advantages in the B&R Initiative. First of all, its location. Hong Kong is the place where East meets West in a peaceful and integrative manner. Hong Kong also has a strong professional services sector in areas such as law, accounting, and finance. China may be first on the technical side, but B&R is facing policy, cultural and employment issues. So hopefully Hong Kong can partner with mainland China State-Owned Entreprises (SOEs) and contribute towards the B&R Initative.

Can Hong Kong play a wider role?

Hong Kong has a lot of companies which have expanded globally, from ports, to subways to power utilities. After all, one of the very earliest PPP projects in China was the Shenzhen-Guangzhou toll highway, and that was launched by a Hong Kong company. Mainland China SOEs can learn from the successful Hong Kong examples. So, Hong Kong can play a bridging role, as it has long and successful experience with a variety of PPP models.

China meets the world

How well is China interfacing with countries along the B&R?

Over the past decade, China's economy has grown to be the second largest in the world. So now China should fulfil the global duties of a big country. But there are some challenges: Firstly, integration in the target countries. How should the target countries cope with China where there are big differences in value and cultural systems? These countries may need the investment but they also have to build a long-term cooperation system based on mutual trust. Also from China's perspective there is a challenge. Most projects are run by SOEs. They have the capital but not necessarily the know-how to deal with widely varying circumstances in the target countries.

What sort of projects are problematic?

A number of China SOEs has been developing the port of Gwadar in Pakistan. But management hasn't developed sufficient know-how on the local situation yet. Also, B&R is an ambitious national-level initiative, but Chinese companies on the ground do not necessarily work closely together. As a result, public goods, employment training, transport, education may lack coordinated development

How can this be solved?

China is now making efforts to coordinate the operations of companies working in a target region. Also, a lot of training courses are being provided to help Chinese companies learn more about PPPs, including the cultures of the target countries. At present, Chinese companies are mainly using Chinese labour. But in the future, when the size and quantities of projects increase, they will have to employ local people. This is a strategic aim, so training is a major issue.

Is China looking for greater market penetration in return for B&R?

This is one factor, but the most important is to fulfil China's global duties. There are also strategic and economic considerations, and projects such as the China-Pakistan Economic Corridor will facilitate the economic exchange and cooperation of the economies along the Corridor.

The educational role

What contribution can our universities make?

At the International Public-Private-Partnership Specialist Centre of Excellence for Public Transport Logistics, jointly established by Tsinghua University and CityU, we are designing a master's programme for government officials in the B&R Initiative host countries, and for entrepreneurs as well. This master's level programme will be aimed at both junior and senior officials, and include content such as Chinese policy, PPP theory and practice, Chinese culture, all aimed at enhancing mutual trust and empowerment.

Academically, is B&R under-theorized?

PPPs are a huge arena to explore. In the western context, a PPP is indeed a relationship between the public and private sectors. But in China, most of the "private companies: are in fact SOEs, and therefore government-owned. So, the theory formulated in the western context can't be used in the new type of China PPPs. Both parties are allegedly there for the public interest, but there is a low capacity for risk management and potentially less efficiency. So yes, there is potential for developing new theoretical frameworks in this area. Also, the host countries along B&R are much differentiated. It would be a challenge to employ people-first PPPs and localize the standards or best practices which are formulated in western contexts. More research is needed to address such concerns.