Risk perception analysis: Participation in China’s water PPP market

In China, the massive demand for water infrastructure and lack of capital has precipitated the rapid growth of Public–Private Partnerships (PPPs) in the water sector. However, the current market indicates that numerous foreign companies have been either reducing their business or have retreated from the market whereas some are aggressively taking market share. Given the assumption that there are two broad categories of risks restricting foreign companies’ market participation—PPP project risks and legal and regulatory barriers—it was found that the revocation of fixed return policy, current low level of water prices and its difficulty of adjustment are the most significant risks. Moreover, an active player has a visibly and statistically lower level of risk perception than a market retreater. This implies that active players ascribe much importance to market practices rather than the incompleteness and ambiguity of China’s PPP legal system; they are more certain that the risk mitigation strategy is highly effective, and operational profits can be greatly increased through price adjustment.