Source: Bloomberg
Banks no longer provide loans, employees' salary reduction, and business models are difficult to sustain. This is the desolate status quo facing many urban investment companies in China.In the past ten years, such platform companies have played an important wallet role for local governments in China, and have provided trillions of funds for the world's largest wave of infrastructure.
"No one buys the debts issued by our company, and the bank does not give us loans," said Ms. Yang, a financial staff of a city -owned urban investment company in a local city -level city in western China, said that the company did not raise wages after 2016, at leastOne -quarter old employees have resigned in recent years.
Coincidentally, employees in a county -level urban investment company in Northwest China said that bank loans can only be used to return to the old, and some loan interest costs are up to 10%. At present, no debt disposal plans can be seen.The employees of the urban investment company who were interviewed expressed that they did not want to be named because they were not authorized to discuss the government's financial situation without authorization.
Among the several local financing platforms recently interviewed by Bloomberg, these are just microcosm.With the growth of economic growth and the heating of real estate, the focus of macro policies has also shifted from expanding investment to resolving debt risks.The original business model of the urban investment platform is no longer after the central government tightens fiscal discipline.With fewer business, most of them can be based on their own business. Most urban investment companies with heavy debt have become difficult to transform and become a major heart disease in the financial system.
The Ministry of Finance and the National Development and Reform Commission did not reply to the fax of Bloomberg News.
Difficult transformation
The Chinese government has hoped to promote the "market -oriented transformation" of urban investment for many years, that is, gradually weaken the platform company's quasi -financial financing function and curb the risk of hidden debt. At the same timeThe company conducts equity investment, etc. to achieve its own profit and debt scroll and digestion.
"Dipping the financing platform company's government financing function" has seen the explicit requirements of the central government as early as 2014. Then the central government cooperated with more than 100,000 yuan in local debt replacement, but the transformation of urban investment has progressed slowly.The platform company's bonds and non -standard debts continued to rise.
The February report of the International Monetary Fund was estimated that by the end of 2023, the total debt of the China Government Finance Platform (LGFV) will reach 66 trillion yuan, which is higher than 40 trillion yuan in 2019.
A urban investment in Chongqing is a typical example.The area where the urban investment is located has been committed to getting rid of the dependence on and accelerating the transformation and development of single resources.The company spent billions of yuan to build roads, pipelines, factories, and affordable housing, and ensure the supply of raw materials to help transform a former mining area into a coal chemical development zone.However, in this process, the cash flow brought by its operating activities is difficult to cover its growing debt.The latest rating report shows that the company's liabilities are 6 times the scale of cash on their accounts, and the pressure on funding in the future is too large.
An employee of the company said that the company is indeed considering the transformation, and the direction is to better integrate with the real economy, but "has not found a good way to operate so far."
"Bus company, thermal, tap water, sanitation company and other names under our company, but we have no actual control." The aforementioned Ms. Yang said, "We have been talking about the transformation for almost 10 years, but we have been inIn fact, it has not happened. "
End of the historical mission
In the past, as long as the local government's fiscal revenue increased steadily, and continued to provide financial support for urban investment to ensure that they paid interest on time, urban investment could roll financing; now, on the one hand, fiscal discipline tightenThe peak is approaching. On the one hand, the real estate market was weak and the epidemic was dragged down, and the financial pressure of the Chinese local government itself was also increasing.
As a pre -investment executive of a central region says, "The historical mission of urban investment in pure public welfare infrastructure investment project has ended."
In recent years, China has relied on the issuance of special bonds to issue local governments to raise funds for infrastructure projects. This year, the number of new special bond issuance has been 3.8 trillion yuan.However, because the special debt requires the cost of the project's income, it cannot be used for pure public welfare projects, so it cannot completely replace the role of urban investment.
The Logan Wright predicted by Rong Ding Consulting predicts that in order to cope with the problem of urban investment debt, "investment will have significant structural slowdown, and economic growth will slow down in the next ten years."The impact of China's economy will be equivalent to the real estate market crisis. "
Financial market investors are more cautious about urban investment.Urban investment companies in low administrative levels and difficult areas have a large difficulty issuing debt, shortened by long -term, and a higher risk premium, which increases the cost of debt repayment and re -financing pressure in urban investment. Some areas have been abandoned by investors in the bond market.EssenceThe credit of banks that may form hidden debt has strengthened the control and control, and the difficulty of urban investment from banks from banks has also increased significantly.
Gray Rhino Risk
To deal with local debt risks, the Chinese government has made a variety of attempts.In order to dispel the thinking of local dependence on the central pocket rescue and prevent moral risks, the central government has repeatedly emphasized that "whose children and who take away". Since the large -scale replacement of local debt in 2015, although the amount of local government debt in the budget has increased year by year, it has increased year by year, but it has increased year by year, but it has increased year by year, but it has increased year by year, but it has increased year by year, but it has increased year by year, but it has increased year by year.The central government has not implemented universal assistance to platform debt.
Goldman Sachs data shows that by the end of 2022, the median reserves of the local government's financing platform will not be half of its short -term debt.Li Chunyan, a S & P global rating analyst, said that the most squeezed by urban investment net financing is the district and county -level platform. Some low -level urban investment liquidity in Guizhou, Gansu, Guangxi, Yunnan and other places eats tight.
Facing heavy debt burden and re -financing pressure, some areas have negotiated the exhibition period and interest rate cuts with the bank through debt reorganization and other methods, reducing interest payment burden, and changing space with time.This does not seem to be enough to deal with the pressure on the urgent debt repayment of some high -risk platforms.
Once a large area of urban investment bonds defaults, it may affect the stability of China's US $ 60 trillion in financial system.In order to resolve the risk of local hidden debt, the Central Political Bureau meeting proposed to formulate a package of debt plans at the end of July.Bloomberg reported this month that the Ministry of Finance deployed about 1 trillion yuan of re -financing bonds, allowing local repayment of hidden debt, including financing platform liabilities.
It is difficult to copy success
In addition to fiscal revenue such as taxation and land transfer, theoretically, Chinese local governments have a large amount of assets to help solve the problem of debt -city investment platforms, such as public utilities such as urban water affairs, gas such as gas, industrial and commercial enterprises, tourist attractions and other typesResources, but in actual operation, areas that can successfully use these resources to resolve debts are still limited.
Shanghai is a successful case.The city's subordinate Shanghai City Investment (Group) Company has successfully got rid of the issue of relying on government capital injection and less operating income.There are two listed companies under the company.At present, Shanghai City's main business involves four core sections: water, environment, home, and road and bridge.
This model is difficult to copy across the country. Urban investment companies in relatively weak areas are facing more problems. Problems such as insufficient resources, high government dependence, and difficulty in choosing the direction of transformation may lead to the slow transformation process and the effect of transformation are not effective.good.
A urban investment company with high -speed highway assets in southwestern China also tries to change the existing business model and find a new source of income by investing in enterprises with upstream and downstream related industries. HoweverAlthough the salary is not affected, it is difficult for the company to find a suitable investment project when the real economy is not good.
Li Chunyan, a S & P global rating analyst, said that the Shanghai government can inject assets that can generate cash flow to urban investment, but as far as third and fourth -tier cities are concerned, the quality of assets may be much worse, and there are few small cities or county -level governments.There are very profitable state -owned enterprisesIndustry.
Obtaining investment income through strategic investment is also a way out.A urban investment company in Hefei City, Anhui Province, Hefei Urban Construction participated in investment, introduced electric vehicles, display semiconductors and other emerging industries.
Driven by the local governments, in recent years, Weilai Automobile, BOE, and HKUST Xunfei and other enterprises have deeply deployed Hefei, which has continuously provided new growth points for the local economy.However, such models have higher requirements for government management and operation capabilities, and it is more difficult to copy it simply.
