The Emerging Chinese SOE Model of Infrastructure Financing and Development : Is there Institutional Convergence in Asia?

A nation’s economic development requires a significant investment in infrastructure. Infrastructure investment, however, is costly and risky: it is capital intensive, is potentially unprofitable, and requires high levels of technical expertise in many disciplines. To solve this challenge, most countries, apparently including China, seem to have adopted the public-private partnership (PPP) model for infrastructure financing and development — a legal-financial model developed in the United Kingdom in the 1990s. Being private sector driven, the Western PPP model was seen as a solution to the problem. This paper, however, argues that the Western model is far from globalized. China, in particular, has created and advanced its own model of infrastructure financing and development. Under the Chinese model, state-owned enterprise corporations (SOEs) lead infrastructure financing, construction, and operation. The Chinese model has been developed and indeed become a contender in emerging markets and developing economies in Asia such as Indonesia and Vietnam. This paper investigates the characteristics of the Chinese model, examines evidence for its dissemination, and identifies intriguing shoots of evidence for convergence toward this model in Asian nations by examining the case studies of Indonesia and Vietnam. As will be demonstrated, these two countries adopt the Chinese model and, among its various characteristics, including SOEs dominating infrastructure financing and development