Mechanism of Asset Devaluation in the Planning Stage of Urban Rail Transit PPP Projects in China: A System Dynamics Approach

Urban rail transit public–private partnership (PPP) projects are characterized by their significant public attributes and strong externalities. They often exhibit low profitability and require substantial capital for operation. Coupled with the absence of a robust payment guarantee system, these factors can easily result in the asset value of PPP projects in the market failing to meet anticipated targets. This situation frequently leads to a proliferation of inefficient and ineffective investments related to assets each year, posing a risk of asset devaluation. Based on a retrospective analysis and categorization of previous research topics, the performance of asset devaluation can be divided into two distinct types: cost-driven asset devaluation and functional asset devaluation. Cost-driven asset devaluation is defined as cost overruns in a PPP project, while functional asset devaluation refers to functional redundancy resulting from agreed-upon functions in a project that either fails to meet public demand or exceeds it. The asset planning phase represents the most vital and pivotal link within the entire asset lifecycle management. The rationality of goal setting directly influences the government’s subsequent project expenditures. Consequently, this paper adopts an array of methodologies to thoroughly examine the influence mechanism of asset devaluation in the asset planning stage. First, risk factors (R) contributing to asset devaluation were identified by integrating literature reviews, case studies, and expert (E) interviews. Second, system dynamics modeling was utilized to articulate the relationships among these risk factors. Finally, this study utilized the simulation modeling of the Beijing Metro Line 4 project to identify the critical risk factors affecting cost-driven asset devaluation and functional asset devaluation, respectively: the reasonableness of return mechanism measurement and the reasonableness of market forecast. The critical factors impacting both cost-driven and functional asset devaluation were identified as: professionalism in feasibility study preparation, and clarity of risk-sharing framework, among others. Findings enrich the research on asset management in PPP projects and provide theoretical guidance for the accurate diagnosis and precise prevention of asset devaluation.