Comment: A highway in Guizhou highlights the challenge of Chinas economic stimul

Source: Bloomberg

Author: James Mayger, Fran Wang

On a unprecedented six -lane road in Southwest China, there are occasional cars to drive by one side. On the other side, several young people run jogging in the drizzle, housewives walking dogs, and some retired men.Take the bird cage with friends.

Fengxin Express Line is one of the many unfinished infrastructure projects in Zunyi City, which has a population of 6.6 million people in Guizhou Province.In addition to the highway, there are also some housing projects and tourist attractions that have not been completed, symbolizing that many local governments in China have faced the serious debt crisis that have faced economic growth after many years of credit stimulation.

This model is obviously unsustainable. Even if the steps after the epidemic are staggered, the central government seems to be unwilling or unable to prescribe the prescription.After decades of urbanization, the demand for the construction of more infrastructure is not as large as before. It is becoming more and more difficult to find a favorable project investment, and the return on investment is getting worse.Due to the downturn in the real estate market, the revenue of land selling land has decreased significantly.

In 2012, the Chinese State Council issued documents to promote investment in this poor province to reduce its development gap with the country, and then Guizhou set off an infrastructure boom.As a result, Guizhou's transportation is even more open, but the signs of excessive investment are also obvious.According to the China Economic Daily, nearly half of the top 100 global rankings are in Guizhou.The airport in the province's cities has been connected by the high -speed rail. It is only a few hours apart, and there are many expensive multi -lane highways.

Now, the provincial government is working hard to pay debts. Small enterprises participating in construction projects have not been paid. Residents who are affected by related projects must be relocated.

Some small business owners ask for no matter what the door is, and to the online forums operated by official media to express their dissatisfaction, hoping that public opinion will reach.

In April this year, Anshun City (about three hours from Zunyi) A construction team publicly asked Xu Lin, secretary of the Guizhou Provincial Party Committee, and wrote in the information of Xu Lin operated by the People's Daily.The shantytown renovation supporting infrastructure project has been completed for almost five years, but only half of the project funds have been obtained, affecting their lives.

He wrote, "Now that we have been prosecuted by the material dealer, the workers have seriously affected all my lives, and they have to pay bank loan interest on time every year."" ".

More than a month later, the Anshun Municipal Government responded that the district government "is actively raising funds and strive to pay the project funds that you have arrears as soon as possible."

The Zunyi Municipal Government refused to comment on the wider plans to deal with debt issues.

Overlooking Fengxin Express is two apartment buildings with almost no windows.The government has notified residents to relocate, and buildings will be demolished to free up space to build a new road.A 68 -year -old man living nearby said that due to the exhaustion of funds, these blocks were brushed and renovated and hoped to be resale.He only wanted to reveal his surname Chen.

The old man named Chen said, "The government has no money, and even the resettlement fee promised to the demolition households cannot be paid."

"It's noisy," the government has no money, "said the old man who once served as the driver."There are too many things like this in Guizhou."

The core of China's debt crisis is the so -called local government financing platform (LGFV). The establishment of LGFV is to avoid the limitation of municipal official issuance of bonds in the market and provide funds for infrastructure.However, LGFV rarely generates sufficient returns to fulfill its debt repayment obligations, which means that most financing platforms rely on re -financing and injecting municipal funds to maintain their solvency, but it is becoming increasingly unreasonable.As investors are more cautious, the debt exhibition has become more and more difficult.

The funds owed by LGFV are called "hidden debt" because it will not appear on the government's balance sheet.This issue has become the main risk of China's economy, and it is also a major doubt about investors who purchase urban investment corporate bonds.

The unpaid shantytown reconstruction project of Zunyi New District is one of the cases of its LGFV -related risks.Developers are Zunyi New District Development Investment Co., Ltd., which is a subsidiary of the large LGFV Zunyi Daoqiao Construction (Group) Co., Ltd.

A woman standing near the project said that the government recovered her land and houses in 2011 to give way for the construction project.Twelve years later, she still lived in the rented apartment. The government promised to give her a new home, but so far she has not been realized.Now, she earns about 1,300 yuan through cleaning the streets every month.

"There is no land now, only sweeping the floor", the 49 -year -old woman who did not want to disclose her name said."The cost of life is much higher. We used to grow vegetables by ourselves. In the past, we lived in our own house. Now we have to rent a house. I used to use well water. Now we have to pay for water and electricity.

Although there are no official figures, the International Monetary Fund (IMF) estimates in February that as of the end of 2022, LGFV's hidden debt across the country reached 66 trillion yuan, higher than 40 trillion yuan in 2019.The central government has been demanding local governments to clean up debt and re -incorporate them into the balance sheet, but the financial conditions of many provinces are still unstable.

Guosheng Securities estimated in a report in April that the total amount of the existing bonds of the Guizhou provincial capital investment platform was 318 billion yuan.China announced in 2022 that it allows Guizhou Urban Investment Enterprises to re -negotiate on debt clauses. Zunyi Daoqiao Construction (Group) Co., Ltd. reached an agreement with the bank in December to reorganize some of its debt.

In exchange for space in time, it seems that LGFV avoids the main way to avoid the outbreak of a comprehensive credit crisis in the short term.At the same time, large state -owned banks in China are reported to provide LGFV with ultra -long -term loans and temporarily exempted interest on interest to avoid credit tightening.