10. Public-Private Partnership Policy Uncertainty and Firm-Level Investment

This chapter delves into the intricate world of China's Public-Private Partnership (PPP) market, focusing on the impact of policy uncertainty on firm investment. By analyzing 905 central-level PPP-related documents, the study constructs a unique index of policy uncertainty based on policy text, offering a more precise measurement than traditional news-based indices. The research reveals a 'double-center' structure of collaboration between the Ministry of Finance (MOF) and the National Development and Reform Commission (NDRC), with their coordination failures contributing to policy uncertainty. The study finds that policy uncertainty significantly discourages firm investment, with both negative regulations and unclear statements playing a role. The analysis also highlights the importance of China's PPP market for the macroeconomy and its relevance for developing countries seeking a balance between revenue constraints and high-quality development. By decomposing the policy uncertainty index into positive, neutral, and negative components, the study provides a nuanced understanding of how different types of policy presentations affect firm investment. The findings contribute to the literature by introducing a novel approach to measuring policy uncertainty and analyzing its heterogeneous effects on investment behavior.