[The Epoch Times, December 08, 2022]In recent years, the issuance scale of the local government special bonds (hereinafter referred to as “special bonds”) of the CCP has increased rapidly, and the outstanding debt exceeded the 20 trillion yuan mark by the end of this year.
According to a report by China Business News a few days ago, the scale of special bond issuance has been increasing year by year, which has also brought about a rapid increase in the balance of debt. According to the latest data from the Ministry of Finance of the Communist Party of China, as of the end of October 2022, the balance of local government debt across the country is about 35.17 trillion yuan, of which special debt is 20.71 trillion yuan and general debt is 14.46 trillion yuan.
Special-purpose bonds were issued for the first time in 2015, and the scale was close to 100 billion yuan that year. The scale rose rapidly in the following years. This year, the scale of new special-purpose bond issuance exceeded 4 trillion yuan for the first time.
Local government bonds are divided into general bonds and special bonds. The former is for non-profit public welfare projects, and the debt repayment comes from the general public budget, while the latter is for public welfare projects with certain income, and the debt repayment comes from the corresponding government fund income or Special income generated from project income. Special-purpose bonds are also known as the Chinese version of municipal bonds.
Revenue from local government funds, one of the main sources of debt repayments, has declined this year. According to data from the Ministry of Finance of the Communist Party of China, in the first ten months, local government fund budget revenue at this level was 4.8537 billion yuan, a decrease of 24.3% over the same period of the previous year, of which the income from the transfer of state-owned land use rights was 4.4027 billion yuan, a decrease of 25.9% from the same period of the previous year .
Luo Zhiheng, Chief Economist of Yuekai Securities, said that since the beginning of this year, the risk of real estate companies has caused financing difficulties for real estate companies and residents’ lack of confidence in buying houses, which has caused the real estate market (including the land market) to continue to slump. In the first 10 months, government fund budget revenue fell year-on-year , Impact local financial resources.
The “land transfer fees” of local governments, that is, income from land sales, used to account for around 30% of local government revenues. However, under the Great Recession of China’s property market, this income has dropped sharply.
In addition, under the normalized epidemic prevention and control policy of the CCP authorities, local governments have spent huge sums of money to build shelter isolation points. In addition to solving construction projects directly through government financial funds in most places, there are also many local governments financing through the issuance of special bonds.
Where does the proceeds of these special debt projects for shelter isolation points come from?
Judging from the more than 50 implementation plans or special evaluation reports on the self-seeking balance between income and financing of the special debt projects of the grass-roots government’s shelter isolation points that have been sorted out, the income of each specific project is different, but generally speaking, shelters during the epidemic Hospitals and isolation points basically have no source of income, and most of the income comes from rental income during non-epidemic periods.
In this regard, an expert who has been concerned about local debt for a long time said that any calculation must have a corresponding basis. For example, the above-mentioned report directly predicts that there will be 140 days of epidemics every year within five years. Obviously, the basis is not sufficient, and there is no scientific and objective basis to support it.
Some delegates warned that it would be “difficult to repay on schedule” local government debt maturing in the next few years, according to an October announcement on the website of the Communist Party’s National People’s Congress. They called for contingency plans to be put in place as early as possible.
Responsible editor: Li Bing#