From Bloomberg via Yahoo Finance-Canada, May 21:
In 2021, a remote coal town in northeastern China was forced to undergo an unprecedented financial restructuring. Its struggles since are an ominous sign for President Xi Jinping as other heavily indebted municipalities look set to follow suit.
Hegang, a city with nearly a million people near the Russian border, had debt of more than double its fiscal income when it hit the headlines almost 18 months ago. It was the first time a city administration had taken official emergency steps since the State Council unveiled rules in 2016 on how local governments, from counties to provinces, should deal with debt risks.
Hegang’s residents are now feeling the brunt of the fiscal clampdown. During a recent visit to the city, locals complained about a lack of indoor heating in freezing winter temperatures, and taxi drivers said they were being slapped with more traffic fines. Public school teachers worried about rumored job cuts, and street cleaners endured two-month delays to their salaries.
Outside the city’s largest hospital, a middle-aged orderly wearing green scrubs and a mask said her employers unilaterally changed her work contract from a government-run medical facility to a third-party vendor, reducing benefits like paid overtime for working on holidays. Her monthly wage of 1,600 yuan ($228) had been delayed by more than 10 days every month since late last year.
“I’m upset about the situation,” said the woman, who asked not to be identified in order to talk freely about her work conditions, as she pushed a wheelchair loaded with flattened cardboard boxes to an outdoor recycling point. “Everything is so expensive. I can barely get three square meals a day.”
Hegang represents just the tip of the iceberg of a local government debt problem that’s making investors increasingly nervous and that threatens to be a 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....
....MUCH MORE
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