On January 29, 2023, the Budget Department of the Ministry of Finance of the Communist Party of China released data. As of the end of December 2022, the balance of local government debt across the country was as high as 35 trillion yuan. The picture shows the Central Bank of China. (Mark Ralston/AFP)
[The Epoch Times, March 2, 2023](Comprehensive report by Epoch Times reporter Li Jing) The Beijing authorities have repeatedly issued notices asking governments at all levels to “tighten their belts.” The government’s tight schedule is not a short-term response, but a long-term policy.” At present, local government debts have reached 35 trillion yuan. Beijing has made it clear that it will adhere to the principle of the central government not providing assistance, and requires local governments: “Whoever owns the child will be held.”
On March 1, the Information Office of the State Council of the Communist Party of China held a press conference. At the meeting, Minister of Finance Liu Kun said, “We will not waver in insisting that the party and government agencies live under tight conditions.” He introduced that the central department took the lead in strict expenditure management, and general expenditures have been reduced for four consecutive years, and mentioned the decline index of the central department’s expenditure budget last year.
Liu Kun emphasized, “The government’s tight schedule is not a short-term response, but a long-term policy that should be adhered to.”
He also mentioned that the Ministry of Finance will strictly prepare budgets, reduce and cancel inefficient and ineffective expenditures, and will urge local governments to promote the construction of an assessment system for tight living conditions, and strive to reduce administrative operating costs.
In fact, as early as 2019, the CCP authorities have issued notices many times, asking governments at all levels to “tighten their belts” and prepare for “a hard life.” In October 2022, when the authorities reported the situation of the “three public funds” of the central and local governments, they mentioned “too tight life” eight times.
The CCP’s local government debt is as high as 35 trillion
According to the annual budget report of the CCP’s local governments, China’s provinces will spend at least 352 billion yuan on epidemic prevention and control in 2022. To make matters worse, the central government has implemented tax cuts to stimulate the economy, reducing local government revenue.
In addition, the central government’s crackdown on real estate developers has created a real estate crisis that has swept the country, which has also hit local government revenues. Revenues related to land sales typically account for more than 30 percent of local government revenues. In 2019-2021, the share is around 40%. But revenue from land sales in 2022 has fallen by nearly a third compared with 2021.
The sharp increase in fiscal expenditure and the sharp drop in revenue have put local governments in trouble. Local governments have been borrowing to fill the gap.
On January 29 this year, the “Local Government Bond Issuance and Debt Balance in December 2022” released by the Budget Department of the Ministry of Finance of the Communist Party of China showed that by the end of December 2022, the balance of local government debt across the country was as high as 35 trillion yuan, higher than the previous year. 30.5 trillion yuan per year.
Hidden debt accumulated through local government financing vehicles (LGFVs) might more than double the total debt burden. Houze Song, a researcher on the Chinese economy at the think tank MacroPolo, estimates that debt held by LGFVs has exceeded 70% of GDP.
Beijing under the Debt Crisis: Whoever holds the children will find a place to find “the way to make money”
In an interview with Xinhua News Agency in early January, Liu Kun, Minister of the Ministry of Finance of the Communist Party of China, specifically mentioned that “it will further break the government’s bottom-line expectations” on the topic of regulating and managing local government financing platform companies.
At the same time, a response to the proposal disclosed on the official website of the Ministry of Finance of the Communist Party of China is also clear regarding the debt risks of local governments. At the same time, establish a debt default disposal mechanism to share risks between debtors and creditors.
Faced with increasingly dire fiscal conditions, some cities are turning to new ways to raise money. One way is to sell local assets.
For example, in August 2022, the Civil Affairs Bureau of Rongjiang County, Guizhou publicly auctioned the 20-year franchise right of the county’s funeral home at a price of 126.8 million yuan; The auction for the overall transfer of 30-year management rights of sightseeing tour buses and stalls has a reserve price of 1.71 billion yuan.
In July 2022, cities in China will successively announce their budget implementation for 2021. According to “Southern Weekend” statistics, among the 111 prefecture-level cities that have released data, 80 cities will see an increase in fine and confiscation revenue in 2021, accounting for more than 72%. Some cities explained the reason for this: the law enforcement income of public security and other departments has increased significantly.
For the category of government confiscations, people pay the most attention to the “way to make money” in the transportation system.
2020 is the first year of the outbreak in China. According to media statistics, the total amount of traffic fines that year was regarding 300 billion yuan. According to the number of civilian cars in the country that year, the average fine for each car exceeded 1,000 yuan. According to Lu media reports, the government of a certain northern county has become “the king of the mountain who relies on the road to eat the road.” Traffic fines actually “support” one-third of the county’s fiscal revenue.
Another problem brought regarding by the local lack of money is the problem of medical insurance. Funding for health insurance comes from local government finances. When funds were in trouble, Wuhan and other cities promoted medical insurance reforms, and the local government reduced the rebates for personal accounts of medical insurance, triggering protests by the elderly on the streets.
Responsible editor: Sun Yun#
