Wuhan - the largest city in central China - has just publicly asked hundreds of local companies to repay debts to the government.
Last weekend, the Wuhan Finance Bureau reported in the Changjiang Daily that 259 companies and entities owed them more than 100 million yuan ($14 million). Officials urged the companies to repay the overdue debts as soon as possible.
The debtors include state-owned companies, private companies, government offices and think tanks. Notable names include Dongfeng Wuhan Light Vehicle and Uni-President Enterprises, a Taiwanese food and beverage giant with a large presence in China.
The Wuhan Finance Department said it had failed to collect debts and was offering rewards to anyone who could provide useful information about the financial assets of the debtors, a rare move that highlights the financial distress many Chinese localities are facing amid economic turmoil.
People walking on the streets of Wuhan in December 2022. Photo: Reuters
Chinese President Xi Jinping’s Zero Covid strategy has drained the budgets of many provinces and cities in the country, as billions of dollars were spent on continuous lockdowns, mass testing and centralized quarantines. China only abandoned the strategy last December. Wuhan was the epicenter of the outbreak in China when Covid-19 emerged in late 2019.
Another reason is the collapse of the real estate market, causing localities to lose large revenues from land sales.
Analysts estimate that China’s public debt exceeded 123 trillion yuan ($18 trillion) last year, including $10 trillion in “shadow debt” from risky local financing tools.
As budgets tighten, some cities have cut back on social spending. Some essential services are also at risk of being eliminated.
Days before Wuhan’s debt collection announcement, Kunming (Yunnan, China) was also struggling to raise money to pay bondholders. Yunnan is currently one of the most indebted provinces in the country, with a debt-to-budget revenue ratio of more than 1,000% last year.
Guizhou – one of China's poorest provinces – also declared last month that it could not resolve its financial troubles and had to seek government aid to avoid bankruptcy.
Ha Thu (according to CNN)
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