Wuhan, a city in central China, publicly named hundreds of debtors in a local newspaper article demanding payment, a rare move underscoring the fiscal problems facing provincial governments.
(Bloomberg) — Wuhan, a city in central China, publicly named hundreds of debtors in a local newspaper article demanding payment, a rare move underscoring the fiscal problems facing provincial governments.
The city’s local finance bureau printed a list of 259 entities with outstanding payments dating back to December 2018 in the Yangtze River Daily — the official mouthpiece of the Wuhan government — on Friday. The debts listed totaled more than 300 million yuan ($42.4 million). While the Wuhan municipal government’s revenue hit 50.77 billion yuan in the first quarter of the year, that marked a 8.5% decline on the same period last year.
The Wuhan Municipal Bureau of Finance said in the page-long article that attempts to collect the money by writing to debtors had failed, and urged those named to “immediately perform the relevant statutory debt repayment obligations.”
The biggest debtor to the Wuhan finance bureau was a car manufacturer that owed the government 23.5 million yuan. A number of district financial bureaus were also on the list.
Read more: China’s $23 Trillion Local Debt Mess Is About to Get Worse
Several state-affiliated publications, including the Securities Times, reported on the Wuhan government’s public notice over the weekend, and reprinted the list. The page in question wasn’t available on Yangtze River Daily’s official website.
Shi Zhengwen, a professor at China University of Political Science and Law, said provinces rarely attempt to collect debt through public notices. Wuhan’s actions “reflect the current challenges for local government finances, as debt collection is not as urgent when funds are abundant,” said Shi.
He added that China’s finance ministry has been stressing financial discipline recently and a public call for debt collection is one way for a local government to show it’s taking that push seriously.
China is facing a local government debt problem that threatens to drag on the world’s second-largest economy for years to come. Goldman Sachs Group Inc. estimates China’s total government debt is about $23 trillion, a figure that includes the hidden borrowing of thousands of financing companies set up by provinces and cities.
The majority of China’s 31 provincial authorities have already exceeded a threshold set by Beijing to signify disproportionately high debt risks. While it’s unlikely any of the regional governments will default, the high debt levels may force some to scale back spending.
(Updates with expert comment in sixth paragraph.)
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