On December 30, 2022, Zunyi Daoqiao Construction (Group) Co., Ltd. (Zunyi Daoqiao) announced a bank loan restructuring plan.
The plan shows that this bank loan restructuring involves a debt scale of 15.594 billion yuan. After friendly and equal negotiations with various banking financial institutions, the bank loan period after restructuring will be 20 years, and the interest rate will be adjusted from 3%/year to 4.5%/year. Only the interest is paid in one year and the principal is not repaid, and the principal is repaid in installments in the next 10 years.
Zunyi Daoqiao is the largest urban investment bond issuer in Zunyi City. It is an unlisted bond issuer. The controlling shareholder is the Zunyi City State-owned Assets Supervision and Administration Commission. 170.445 billion yuan, the asset-liability ratio is 50.9%. Zunyi Daoqiao has issued 64 bonds of various types since 2012, with a cumulative bond financing scale of 38.669 billion yuan, and 33 bonds still exist.
Guan Buyu, a researcher at Glacier Think Tank, wrote in an article on January 4 that the line here is: “Okay, I won’t pretend anymore, I’m going to show my cards. I want to be an old man gracefully.”
Chengtou is a company directly under the CCP’s local governments. Its main business is local infrastructure, bridge and road construction, municipal greening, and various landscape facilities.
Guan Buyu wrote that when it comes to a company, it is the so-called “public welfare first, supplemented by business“. Since it is “public welfare”, it is justifiable to lose money. Therefore, except for a few top-tier and first-tier urban investment companies, almost all urban investment companies are losing money confidently.
Chengtou serves the local finance, and its main business is to cover the local finance with a vest for financing. The local government puts on this vest for convenience. It is a company in name, and the debt it borrows is commercial, not subject to fiscal discipline, and not included in government debt.
In short, Chengtou borrowed money from banks in the name of infrastructure projects and then lost money. A large number of ineffective infrastructure in various places, such as large-scale landscapes with empty houses, empty roads and bridges, and urban greening after planting and cutting, are mostly from the hands of chengtou.
Guan Buyu pointed out that, knowing that Chengtou’s debts are meat buns beating dogs, and it is a loss-making business, the bank has to lend the money, not only to borrow, but to keep borrowing. Returning the old from the new is the only way for Chengtou to maintain its cash flow. After a few rounds of interest, the debt scale has reached the sky-high amount of “too big to fail”.
According to the data provided by Guan Buyu, in 2021, the balance of interest-bearing debts of China’s urban investment platforms will be as high as 56 trillion yuan; in the past 2022, the total scale of urban investment bonds may have reached 65 trillion yuan. Debt of 50,000.
The huge pit of Chengtou has existed for many years, and it is covered by two fig leafs: first, the real estate boom stabilizes land prices, and the game of land begets money and money begets land can continue to be played; Whichever level of finance comes out to pay for it, just pass it.
Now that real estate is in disgrace and the government’s finances are tight, Chengtou can only run naked. There are only two assets on hand, land that cannot be sold, and a bunch of infrastructure that is losing money. Spread your hands and ask the bank if you want it? If the bank is determined to collect it, bad debts cannot be avoided, so they have to admit it.
Guan Buyu said that as long as there is a little hope of repaying the money, the step of “friendly negotiation” will not be reached. Since the day of its birth, Chengtou has been an anti-market product, ignoring market laws and market rules, and finally getting a pile of invalid assets piled up from invalid infrastructure, and more than 600,000 yuan blocked in the financial system. Yicheng Investment has a huge debt pit. The pit is so big, I really can’t stand it.
According to Bloomberg, in the first half of 2022, the fiscal surpluses of 31 provinces, autonomous regions and municipalities in China will all be negative. Except for the relatively small fiscal gaps in Shanghai, Tianjin, Hainan and Ningxia, the fiscal gaps in Sichuan, Henan, Guangdong, Hunan and Yunnan Relatively large, more than 280 billion yuan.
As China’s real estate industry continues to fall into crisis and the CCP authorities rebate taxes to support the cooling economy, the CCP government’s fiscal deficit will soar to nearly 7.16 trillion yuan in the first nine months of 2022, or about one trillion U.S. dollars, hitting a new high. Only by continuing to issue bonds , will continue to play the game of borrowing new and returning old.
According to a report from Caixin.com on January 9, the issuance of local government bonds by the CCP in 2023 has already started. According to the information currently disclosed by 18 provinces and cities, the planned issuance of local bonds in the first quarter exceeded one trillion yuan, of which nearly 900 billion yuan were newly added special bonds.
Free Asia reported on January 9 that Cheng Xiaonong, an expert on China and a well-known economist, pointed out that in 2022, the local governments of 31 provinces and cities in China will suffer overall financial losses and must issue debts. It is expected that 2023 will not be better than 2022. The local government’s borrowing method is to treat local land as a sellable asset, set up a financing platform to borrow money from the bank, and borrow money from the people’s deposits, which is equivalent to immediately transferring the people’s deposits from the financing platform to the finance to fill up the fiscal revenue of the year.
According to Cheng Xiaonong’s analysis, banks in free countries are commercial banks, and the government cannot transfer money from the banks; however, in China, banks are “official banks” and managed by local governments, so they can get money from banks. The problem is that banks do not create money. Only depositors’ deposits can be emptied.
Regarding local debts, CCP Finance Minister Liu Kun recently accepted an exclusive interview with the CCP’s official media CCTV, emphasizing, “Adhere to the principle of the central government’s non-relief, and achieve ‘whose family’s children will be taken care of’.”
Cheng Xiaonong said, “The (CCP) central government means that I can no longer pay for these holes for you, otherwise the holes will be bigger next year, and they will all lie on my body and rely on me to breastfeed, so the central government will collapse.”
Cheng Xiaonong said bluntly that the result of the CCP’s continued breastfeeding is either high inflation or a banking and financial crisis. Li Qiang, who is about to take over the State Council in the future, is also an inexperienced official. “The biggest crisis in China’s economy in the next three years is not whether it will grow or not, but how the finances and banks will survive.”
According to foreign media reports and analysis, the real reason for the sudden 180-degree U-turn in many of the CCP’s recent policies is the economic crisis and the government’s financial crisis. The CCP really has no money.