Abstract: The impulse of the government’s investment is the intrinsic motivation to break the budget constraints; the current administrative system contributes to the preferences of over investment of Chinese government into public projects. Reasonable regulatory governance over the public projects can not only give full play to the competitive advantage but also form a pattern of multiple checks and balances. Although China has gradually established a “trinity” mechanism to regulate public projects, the effect of it is by no means ideal. By taking such measures as to set up a public project regulatory governance mode based on cooperation contracts, to improve the coordination and communication mechanisms between the various stakeholders, and to achieve reasonable risk-sharing and amicable settlement of contradictions, the problem of maximum regulation of the soft budget constraints over public project investment can be solved.

Key words: soft budget constraint; public projects; three-side game playing; regulatory governance