Evaluation and Management of Political Risks in China's BOT Projects
Publication: Journal of Construction Engineering and Management
Volume 126, Issue 3
Abstract
The potential slowdown of the economic growth in China has led the government to increase spending in basic infrastructure such as roads, ports, and power generation facilities. There are opportunities in the infrastructure sectors for foreign investors. It is important however to identify and manage the unique or critical risks associated with investments in China's infrastructure projects. Such issues have received special attention with the closure of the Guangdong International Trust and Investment Corporation in 1998 and the subsequent confusion over government support and guarantees. This paper is based on the findings from an international survey on risk management of build-operate-transfer (BOT) projects in developing countries, with emphasis on infrastructure projects in China. It discusses specifically the criticality of the political and force majeure risks. Based on the survey, the following critical risks, in descending order of criticality, are identified: Chinese Parties' reliability and creditworthiness, change in law, force majeure, delay in approval, expropriation, and corruption. The measures for mitigating each of these risks are also discussed.
Get full access to this article
View all available purchase options and get full access to this article.
References
1.
Baker & McKenzie (B&M). (1996). “`The power industry in China' and `Allocation and management of risks in privately financed infrastructure projects.”' B&M Projects Group's Proj. Rep., Hong Kong.
2.
Chew, A. (1997). “Da Chang water in the money.” Asia Pacific Market Rep., Summer, London, 33–35.
3.
He, J. (1996). “Introduction to the application of BOT scheme in China.” J. Foreign Investors, Beijing, 1, 5–7 (in Chinese).
4.
Hsu, D. (1996). “Prospects for BOT projects in China.” J. Proj. Finance Int., London, 99(June), 12–13.
5.
Lam, P. (1967). “A sectoral review of risks associated with BOT projects.” Res. Rep., KPK Ltd., Singapore.
6.
Macdonald, R. (1997). “Chinese BOT risks.” Res. Rep., Tokyo University, Tokyo.
7.
Orr, D. (1997). “China's new rules.” J. Infrastructure Finance, London, Dec./Jan. 37–39.
8.
Project Finance International. (1997). “The Chinese power market could be about to take off.” Asia Pacific Market Rep., London, Summer, 2–3.
9.
Tiong, R. L. K. (1990). “Comparative study of BOT projects.”J. Mgmt. in Engrg., ASCE, 6(1), 107–122.
10.
Tiong, L. K. ( 1992). “The structuring of BOT construction projects.” Monograph, Ctr. for Advanced Constr. Studies, Nanyang Technological University, Singapore.
11.
Tiong, R. L. K. (1995). “Risks and guarantees in BOT tender.”J. Constr. Engrg. and Mgmt., ASCE, 121(2), 183–188.
12.
Wang, S. Q., Tiong, R. L. K., Ting, S. K., Chew, D., and Ashley, D. (1998). “Evaluation and competitive tendering of BOT power plant project in China.”J. Constr. Engrg. and Mgmt., ASCE, 124(4), 333–341.
13.
Wang, S. Q., Tiong, L. K., Ting, S. K., and Ashley, D. (1999a). “Risk management framework for BOT power projects in China.” J. Proj. Finance, New York, 4(4), 56–67.
14.
Wang, S. Q., Tiong, R. L. K., Ting, S. K., and Ashley, D. (1999b). “Political risks: Analysis of key contract clauses in China's BOT project.”J. Constr. Engrg. and Mgmt., ASCE, 125(3), 190–197.
15.
World Bank and USAID. ( 1994). “Submission and evaluation of proposals for private power generation projects in developing countries.” Occasional Paper No. 2, Industry and Energy Department, Washington, D.C.
16.
Zhang, W. R., Wang, S. Q., Tiong, R. L. K., and Ashley, D. (1998). “Risk management of Shanghai's privately-financed Yan'an Donglu tunnels.” J. Engrg., Constr. and Arch. Mgmt., Oxford, England, 5(4), 399–409.
Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 126 • Issue 3 • May 2000
Pages: 242 - 250
History
Received: Sep 1, 1998
Published online: May 1, 2000
Published in print: May 2000
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.