SINOWEEKLYPLUS

What’s next for China, US with trade war ‘on hold’; local governments ‘don’t want to repay’ huge debts

SinoInsight 1
Chinese financial magazine Caixin recently reported that Lei Zhiqiang, the former vice mayor of Tianshui City in Gansu Province, was prosecuted on charges of corruption involving over 9.2 billion yuan.

OUR TAKE
1. Tianshui City’s 2017 fiscal revenue was about 14.8 billion yuan. And former vice mayor Lei’s corruption case involves a sum that is about 62 percent of his city’s annual revenue.

2. Corruption is rampant in the Chinese officialdom, and Tianshui is only a prefecture-level city in Gansu, a poor province in northwest China. In wealthier provinces, official corruption would surely involve greater sums. The Chinese Communist Party may have carried out anti-corruption campaigns and pushed through reforms, but it has not been able to salvage the rot.

SinoInsight 2
He Wei, deputy chairman of the 11th National People’s Congress Finance and Economic Committee, said at China Enterprise Credit Development Forum on May 19 that local government credit is “very poor,” and may be “even worse than some businesses.” He added that local government debt is about 40 trillion yuan, but the main problem is that “local government doesn’t want to repay its debts.”

OUR TAKE
1. The CCP needs to spend large sums of money to upkeep a large stable of officials to maintain its hold on political power. The local government debt problem would only grow more serious as China’s economy worsens over time.

2. China’s local debt crisis is a negative consequence of authoritarian rule. To secure promotion, local officials take on more and more debt to boost GDP growth and rack up political achievements, for example. Taking on debt also affords opportunities for corruption. Party central and local governments have always been at odds when it comes to policy implementation.

3. Xi Jinping may have a tough anti-corruption campaign and consolidated power to a great degree, but it seems that he cannot resolve the drawbacks of the CCP’s dictatorship.

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