PPP (Public-Private-Partnership) is a cooperation model based on concession agreement. Through this model, the government cooperates with social capital to complete public infrastructure construction or other services. The PPP projects have the following typical characteristics as follows: at least one public and one private partner; mutually compatible (or complementary) goals; complexity/great need for coordination; procurement or task fulfilment; long-term orientation (“life cycle”); bundling, utilization, and synergies of public and private resources; risk-sharing; gains in efficiency/effectiveness (Lienhard, 2006) . China has a huge demand for public services, so PPP has a large market space. In recent years, PPP projects in China have shown blowout growth. Since 2014, China has accumulated 10,282 PPP projects with an investment of 16.4 trillion yuan; 7772 signed and implemented projects with an investment of 12.9 trillion yuan. The investment field includes multiple fields such as energy, transportation, municipal engineering, elderly care, education, etc. There are both “big projects” that lay a foundation and promote development, as well as “small projects” that benefit people’s livelihoods and fill gaps. The PPP model has become an important measure for China to stabilize growth, promote reform, adjust structure, and benefit people’s livelihoods. But there is a phenomenon worth paying attention to. There are 8654 projects in the PPP project database as of December 2018, with an investment of 13.22 trillion yuan RMB. According to the statistics of March 2018, 59% of all PPP projects are in the identification stage, 17% are in the preparation stage, 10% are in the procurement stage, and only 14% are in the project implementation or transfer stage. That is, 86% of PPP projects have not yet been substantially implemented. By the end of June 2022, 151 projects had slow progress, shutdown or even unfinished, resulting in a loss of state assets of 1.722 billion yuan; 10 regions illegally built 10 conference venues or landscape projects, involving a planned investment of 7.566 billion yuan. In 2023, PPP was suspended for several months, and the PPP center project database of the Ministry of Finance was suspended. Some local governments are rectifying the previous PPP projects, and the next step of PPP has attracted much attention. Why does this happen? Through the investigation, it is found that some local governments and social capital dissimilate PPP projects into the financing platforms, which has greatly increased the risk of implicit debt. As a result, most of the PPP projects are in the early stage. The transaction costs and risks of some PPP projects continue to rise, and project conflicts occur frequently.

From November 2017 to June 2018, the Ministry of Finance of China issued a number of regulations to firmly curb this trend. The Chinese government uses these regulations to solve the problems of non-standard operation and frequent crises of PPP projects. Governments at all levels are required to carry out rectification to curb the abnormal cost, slow progress and distorted operation of PPP projects. As of April 2018, the Ministry of Finance has cleaned up a number of illegal projects. There are 1695 projects that have been liquidated, with an investment of 1.8 trillion yuan RMB. There are 2005 projects required to be rectified within the time limit, involving an investment of 3.1 trillion yuan RMB. The social and economic system in China provides a special situation for PPP project governance, so the institutional governance plays a key role in China. What is the function of institutional governance? This is a matter of concern to people. In view of this, this paper uses grounded theory to analyze from practice. This paper takes the current social and economic situation in China as the research background, takes the Institutional governance mechanism as the research object, and gives consideration to discussing the level structure of PPP project governance in China. The research group conducted semi-structured interviews with relevant personnel of government agencies, PPP project management companies and social capital participants, and collected data for analysis. Using interview records to code, the research group summarized the scope of institutional governance. This process helps to find out the manifestations and elements reflecting the institutional governance mechanism. On this basis, the research group further analyzed the governance level structure of PPP projects in China. These studies provide some research basis for reducing PPP project risk, controlling PPP project conflict and expanding the scope of PPP project governance research.

PPP projects are highly uncertain, and the laws and regulations promulgated by the government cannot fully cover any possible situation (Koppenjan et al. 2022) . The main risks of PPP projects include exchange rate risk, operational risk, technical risk, policy risk, and financial risk. Exchange rate risk refers to the inability of cash income obtained locally to be converted into foreign exchange at the expected exchange rate (Bodnar & Bartov, 2010) . The reason may be due to currency depreciation, or it may be because the government artificially sets the exchange rate at a very unreasonable official level (Krechowicz, 2022) . This undoubtedly reduces the value of income and lowers the investment return of the project (Hood & Mcgarvey, 2002) . Operational risk mainly comes from the uncertainty of project financial benefits (Bala, 2016) . In the process of PPP application, it is necessary to ensure that private partners can obtain reasonable profit returns, and therefore require service users to pay reasonable fees (Xu et al., 2010) . However, in the actual operation process, due to various factors affecting the operation status or service provision process of infrastructure projects, the profitability of projects often does not meet the expected level of private partners, resulting in significant operational risks (Sun, 2010) . Technical risks are directly related to the actual construction and operation of the project, and should be borne by private partners (Matsuda et al., 2021) . Private partners need to operate and maintain infrastructure for a certain period of time after completion, so they are more concerned about reducing operating costs (Gupta et al., 2013) . The increase in operating costs will reduce the return on investment for private partners, which will encourage them to complete infrastructure construction with high quality to reduce future operating costs (Veronica et al., 2022) . Policy risk refers to the impact of changes in government policies during project implementation on the profitability of the project (Huang et al., 2022) . In order to minimize policy risks, it is required that the legal and regulatory environment, as well as the appraisal and execution process of franchise contracts, should be transparent, open, and fair (Qin, et al., 2022) . Bureaucratic phenomena should not occur, and human interference should be minimal (Lee et al., 2024) . Otherwise, all parties involved in cooperation will suffer losses (Li et al., 2022) . The size of financial risk is directly related to debt repayment ability (Vrieling et al., 2023) . Financial risk refers to the insufficient cash income from infrastructure operations to pay off debts and interest, which may lead to creditors resorting to legal means to force project companies to go bankrupt, resulting in the failure of PPP model application (Yuan et al., 2023) .

The market economy determines that all participants can make as much profit as possible through PPP projects, and they are not entirely equal in terms of achieving project objectives (Zhang & Zhang, 2013) . They pursue the maximization of their interests, whether subjectively deliberately planned or objectively made, with the goal of not harming their own interests (Hart & Zingales, 2015) . Limited rationality and unpredictability of the future make it impossible for each participant to fully determine the optimal design of the current contract (Hart, 2016) . This increases the likelihood that participants will engage in opportunistic behavior (Halonen & Hart, 2016) . Hart (2011) points out that contractual rights include specific rights expressed in the contract and residual control rights not expressed in the contract. This reflects the incompleteness of the contract. The residual rights conflict is an important element of PPP project crisis. The research team investigated many PPP projects in China, and found that these PPP projects generally run smoothly in the identification stage. In the preparation and procurement stage, participants compete for residual rights under high risk expectations and high uncertainty. There will be a lot of contradictions and conflicts. In this process, government departments also participated in the competition. Halonen and Hart (2013) believe that the requirements of the participants for residual rights are implicit, and the conflict of residual rights will be highlighted only after the conflict of project objectives occurs.

Loosemore (2014) believes that the crisis in project implementation deserves attention. In order to maintain the high performance of the project, it is necessary to reduce the frequency of project conflicts. Relational governance and contract governance have always been considered as the important thrust of project governance. However, in China’s current social and economic practice, the above-mentioned dual governance system has not yet formed a strong force to effectively control the crisis of PPP projects. On one hand, the contractual governance can enable participants to implement various plans and agreements, and has a positive incentive to promote PPP project performance. But some projects are relatively blind, so that local governments can meet the policy requirements of the central government. Some participants violate regulations and operate in secret for their own benefit, they only use PPP as a financing platform, which weakens the role of contract governance. On the other hand, the relational governance plays a key role in maintaining the relationship between all parties and shaping the cooperation situation. But China’s current PPP risks are relatively high, which will continue to reduce the mutual trust of all participants, resulting in a decline in the regulatory capacity of the credibility mechanism. At this time, the participants can only rely on stronger contract governance to adjust the conditions for achieving project objectives (Halonen & Hart, 2015) . This condition can hardly be equated from the perspective of all participants, which weakens the beneficial effect of relationship governance (Li & Li , 2014) .

Due to the blowout development of PPP projects in China in recent years, people generally overestimate the PPP dividend. After the PPP project crisis broke out at the end of 2017, the central government of China began to attach importance to a series of institutional governance in 2018. This paper focuses on these institutional governance, and studies its role in PPP project governance. At present, there is no specific research on the crisis of China’s PPP project and its governance.

The research team used grounded theory for analysis. Team members collect data systematically and compare the similarities and differences of related categories. Semi-structured interviews were selected as data collection methods. Members of the research team paid close attention to some sensitive reactions of respondents, including important non-verbal information. It is hoped that through this way the research team can acquire the real understanding of institutional governance. The interviews are not entirely dependent on the outline, and a harmonious atmosphere is important. This can stimulate the respondents’ enthusiasm to discuss important issues and make them think pertinently. Researchers marked the issues that people were most concerned about in each interview and asked these problems in the next interview. The purpose of this is to further acquire valuable information based on natural emergence (Glaser, 2011) .

Selection of respondents follows the following principles. 1) The research team gives priority to those who have participated in PPP projects. This ensures that the research sample is representative. 2) Respondents should have a certain knowledge of PPP. This ensures the validity of the research sample. 3) Respondents should have a certain amount of time to be interviewed. This ensures the feasibility of the research sample. Fassinger (2005) believes that the number of samples between 20 and 30 can satisfy theoretical saturation in the qualitative research using interviews as data collection sources. Therefore, after preliminary research and selection, the research team identified 28 interviewees, the basic information is shown in Table 1 .

The interview dates ranged from December 2017 to December 2018. There were 22 individual interviews, 2 telephone interviews and 5 small meetings. The individual interview time is controlled in 60 - 90 minutes, the telephone interview is controlled in 20 minutes, and the small meeting time is controlled in 90 - 120 minutes. After the interview, the researcher collates the records and tapes to form the interview briefing, which is the original material for data analysis.

This paper analyses the current China’s PPP governance structure and the Role of Institutional Governance. From 2014 to 2017, institutional governance tends to be incentive, and China’s PPP projects have developed rapidly, forming a large scale in the short term. But behind the rapid development, many PPP projects have produced a lot of risk out of control and contract conflicts. This phenomenon has formed the crisis of China’s PPP mode operation. From the end of 2017 to the first half of 2018, the treasury department of China adopted a restraint-oriented institutional governance, effectively pointing out the chaos, delineating the red line of the system and reiterating the rules. From late 2018 to the present, institutional governance has been taking a reasonable balance between incentives and restraints. The development of China’s PPP model cannot be separated from institutional governance. Relationship governance and contract governance need to rely on the regulation of institutional governance to play a better role. Institutional governance cannot directly eliminate the crisis, but form an indirect impact. Relationship governance, contract governance and crisis governance all can reduce transaction costs, and have a significant impact on the improvement of project performance under the independent and combined effects. There is practical significance to further study the interaction of above three kinds of governance and institutional governance.