Home News Hegang City, Heilongjiang Bankruptcy Expert: More Towns Are In Financial Distress | Financial Difficulties | China’s Local Debts | Fiscal Restructuring

Hegang City, Heilongjiang Bankruptcy Expert: More Towns Are In Financial Distress | Financial Difficulties | China’s Local Debts | Fiscal Restructuring

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[Epoch Times January 08, 2022](Interview by Epoch Times reporter Chang Chun) The recent report on the financial reorganization of Hegang City in Heilongjiang Province has attracted widespread attention. Experts believe that the so-called “fiscal reorganization” means government bankruptcy. In recent years, due to the sharp decline in land finance, more cities and towns are facing the brink of bankruptcy.

On December 23 last year, the Hegang Human Resources and Social Security Bureau of Heilongjiang announced that “Due to the implementation of the fiscal reorganization plan by the Hegang Municipal Government, the financial situation has undergone major changes, and it has decided to cancel the plan to openly recruit grassroots government staff.”

Although the news was quickly deleted, one of the key words “fiscal restructuring” attracted attention from the outside world.

Xie Tian, ​​a professor at the Aiken School of Business at the University of South Carolina in the United States, told The Epoch Times: “It means that Hegang City is insolvent and is about to go bankrupt.”

“The CCP governments at all levels are blindly expanding and expanding the ranks of civil servants. Some county mayors and mayors have more than a dozen deputy positions, cultivate their own power, and more and more people are eating imperial food. Therefore, this bankruptcy is entirely caused by the CCP alone. Of,” he said.

Financial restructuring expert: it is on the verge of bankruptcy

Hegang became the first prefecture-level city in China to implement fiscal restructuring.

The fiscal reorganization first appeared in the “Local Government Debt Risk Emergency Response Plan” issued by the General Office of the State Council of the Communist Party of China in November 2016.

The plan proposes that there are two aspects to launching the fiscal restructuring plan. On the one hand, the annual general debt interest payment expenditure of the city and county governments exceeds the general public budget expenditure of the year by 10%; on the other hand, the special debt interest payment expenditure exceeds the budget expenditure of the government fund of the year. 10%, the fiscal restructuring plan must be initiated.

According to mainland media reports, the fiscal revenue of Hegang City in 2020 is only 2.3 billion yuan (RMB, the same below).

The general public budget revenue and expenditure final accounts of Hegang City in 2020 show that public fiscal expenditures are 13.68 billion yuan, and Hegang’s fiscal revenue for the year is 2.3 billion yuan, which is less than one-sixth of the expenditures, which is a serious overdraft.

Among the 13.68 billion yuan, debt interest payment expenditures were 140 million yuan, accounting for 1.02%.

According to the city’s general public budget expenditure for 2021 released by the Hegang City Government in February last year, the local government’s general debt interest payment expenditure was 230 million yuan, and the total public budget expenditure was 6.77 billion yuan, accounting for about 3.4%.

Wang He, a current political commentator in the United States, told The Epoch Times that the actual situation in Hegang may be more serious due to the fact that the CCP has made many data frauds.

According to Wang He’s analysis, Hegang is one of China‘s resource-exhausted cities. In recent years, not only has the transformation failed, but also the overall economic downturn in China. Coupled with the impact of the epidemic, Hegang’s economy has worsened.

“In such a big background, Hegang is heading towards financial reorganization. From a technical point of view, what is bankruptcy and the inability to pay due debts, bankruptcy must exist in this situation.” Wang He said.

Extreme financial difficulties, the price of cabbage in Hegang houses attracts attention

As early as 2011, Hegang was identified as one of the resource-exhausted cities by the National Development and Reform Commission of the Communist Party of China.

Wang He said, “Listing the purpose of resource-exhausted cities is to carry out industrial transformation, economic transformation, and employment transformation.”

However, why has Hegang not succeeded in its transformation in ten years? Wang He believes that this involves some deep-seated structural and systemic issues in the entire Chinese economy.

“Hegang is very prominent on this issue. For example, the local corruption problem. Hegang can buy a house for tens of thousands of dollars. The price of cabbage is already too low. In addition, the local manpower is huge. Outflow, new industries cannot be established at all.” He said.

According to data from the seventh national census of Heilongjiang City, as of November 1, 2020, Hegang has a permanent population of 891,271 people, and the population has fallen by 15.81% in 10 years.

In fact, resource-exhausted cities have also existed in other countries, such as Los Angeles, Houston, and Orange County in the United States.

Wang He said: “They were once resource-exhausted cities, but they developed new industries, such as Houston’s development of aviation industry, which used the qualifications, technology, finance, etc. of the big city, and it successfully transformed and lived very well. Good. But such an example is very difficult to appear in China.”

Local officials of the CCP cannot really explore transformation. The only thing they can do is to find the province and the central government for money. Wang He said, “For CCP officials, there is no need for merit, but no demerit. Therefore, it is impossible for him. Let go of the courage and explore the issue of economic transformation, but sit back and forth. If you have no money, ask for money from the top. If you don’t give the money, if you stabbed the leak, don’t blame me on the top. The entire CCP system is to cheat the top, Bluff above. Neither party has resolved the issue substantively.”

Jia Kang, dean of the Continental Economics Research Institute and a researcher at the Chinese Academy of Fiscal Sciences, told Observer.com: “The occurrence of such extreme cases in local governments will make them very passive, and other places should take warning.”

Before Hegang, in 2018, two county-level districts and counties, including Yanjiang District and Anyue County in Ziyang City, Sichuan, had implemented fiscal restructuring due to excessive debt pressure; at the end of last year, they were notified of “large-scale arbitrary fines” The fiscal gap reflected in Bazhou City, Hebei Province also worries the outside world; there are more local governments that rely on “land finance”, and the income from land transfers may shrink significantly in the past two years.

Wang He said that in China, there are not a few cities like Hegang. Hegang was already in the third batch when it was designated as a resource-exhausted city by the Chinese Communist Party. There were two batches before it, and there were 25 cities in the same period as Hegang. “In fact, from a technical point of view, many township governments have gone bankrupt, and the debts simply cannot be repaid, and the debts are not paid off.”

Wang He said that the CCP does not allow local governments to go bankrupt, and feels that it cannot hold on to face. Next, the authorities may deal with some officials in Hegang, kill the chickens and curse the monkeys, and do some so-called deterrent actions to prevent other cities from following Hegang. But in the end these debts can only be paid by the people.

Editor in charge: Ye Ziming#

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