2024-08-06
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Reporter of China Business Network: Xu Shuai and Kong Zesi Editor of China Business Network: Zhang Haini
In mid-April this year, the Daily Economic News published an investigative report. After a long investigation, the reporter found thatChina Railway Construction Corporation(601390.SH, share price 6.15 yuan, market value 152.216 billion yuan) Many holding companies were included in the list of "dishonest debtors" or "restricted high consumption". Most of the companies in arrears are small and micro enterprises, with the amount of arrears ranging from tens of thousands to hundreds of thousands or even millions of yuan.
Since May this year, reporters from the Daily Economic News have discovered in their investigations that another central state-owned enterprise with a “Chinese character” in its name—China Railway Construction(601186.SH, share price 8.22 yuan, market value 111.624 billion yuan) is in a similar situation as China Railway Construction Corporation Limited: many of the company's indirect holding companies have been listed as "dishonest debtors" and have been restricted from high consumption.
Several people from China Railway Construction Corporation's indirect holding companies told reporters that it was not a deliberate default, but rather a complex situation involving "three-party debts" owed by the owner, disputes in some lawsuits, etc. The company actively negotiated with small and micro enterprises on relevant payment plans, and recently launched a special campaign and published a complaint hotline for supervision.
Lin Shuanglin, a professor at the National School of Development at Peking University, believes that the above case involves the problem of "chain debt". Lin Shuanglin said that although small suppliers are creditors, they are in a weak position. The owners, central enterprises and small suppliers should actively negotiate, formulate repayment plans, and repay the debts as soon as possible.
China Railway 17th Bureau Group and China Railway 15th Bureau Group are both 100% controlled by China Railway Construction.
Tianyancha shows that as of July 26, the number of cases involving restrictions on high consumption (from the documents restricting high consumption published by the court, it is not ruled out that some cases have been repaid) involving the First, Third, Fifth, and Sixth Engineering Co., Ltd. of China Railway 17th Bureau Group, and the First Engineering Co., Ltd. of China Railway 15th Bureau Group exceeded 1,000 in total.
In addition, the number of cases in which the First, Third and Fifth Engineering Co., Ltd. under China Railway 17th Bureau Group were listed as "dishonest debtors" were in the dozens.
The above-mentioned dishonest situations listed as "dishonest persons subject to execution" include: having the ability to perform but refusing to perform the obligations determined by the effective legal documents, other evasion of execution, the person subject to execution refusing to perform the execution settlement agreement without a legitimate reason, and violating the property reporting system.
Even more extreme is that a Wuhan company had applied for bankruptcy against one of the central enterprises mentioned above. The head of the Wuhan company told reporters on July 10 that the two parties had reached a settlement. The reporter of the Daily Economic News noted that Tianyancha showed that there were more than one cases in which China Railway Construction Corporation's indirect holding company was applied for bankruptcy by the party owed money.
Since May this year, reporters from the National Business Daily have contacted a number of suppliers who were owed money by the above-mentioned China Railway Construction Corporation indirectly holding company through various channels.
"They owe us 10 million yuan. We have been waiting for them to pay since 2019." A supplier manager told reporters on June 1 and July 30 that although the other party had partially repaid the loan, most of the payment has not yet been settled.
A person in charge of a supplier of another building materials store said: "They owe us more than 500,000 yuan, and have been in arrears for three or four years." Now both parties have settled the payment.
The person in charge of a Shanxi Industry and Trade Co., Ltd. mentioned that after they provided equipment leasing services for a local high-speed railway project, they have been owed 2.34 million yuan in principal and interest since 2018. "The court has already ruled, but they still haven't paid... Now I have complained to the SASAC platform and continue to appeal to the court." The person in charge said, "But they haven't paid yet... I (encountered) a debt crisis, and they won't give (money), and the company is on the verge of bankruptcy." In July, he received 240,000 yuan in repayments, but the subsequent repayments from the other party were interrupted again. He is currently waiting for news from the court and is tracking down clues to the property of their subsidiary. On July 30, he further added to reporters: "At present, the other party has not repaid the money, and the company continues to sue the other party."
A relevant person in charge of a steel company in Shanxi told reporters on July 31 that his company has had a cooperative relationship with a subsidiary of China Railway Construction for several years, supplying construction materials for the other party's multiple projects. The company provided labor and steel formwork worth more than 8 million yuan in a certain city, but the other party paid less than 1 million yuan. He said that the court's judgment has been effective for two years, but the other party's account has no funds to execute, and now the company is helpless.
There is also a trading company from Guizhou Province and an environmental protection enterprise from Shaanxi Province. The former has been cooperating with China Railway Construction Indirect Holding Company since 2010. "The money was owed in 2015. We still owe more than 700,000 yuan. Forced execution began in 2019, and we also applied for a freeze."
The latter supplied materials to the Wuhan Water Conservancy Project undertaken by a subsidiary of China Railway Construction in 2020. "It was originally agreed that payment would be made in March, but it was always said that Party A would pay immediately."
Other suppliers also reported that their normal business activities had been affected to a certain extent due to the long period of arrears.
Some suppliers mentioned that the other party's response was not positive. "They said how can we pay without money?" A supplier quoted the debtor's response: "We will pay when we have money."
Generally speaking, the above-mentioned cases of overdue payment are concentrated in some infrastructure projects.
In fact, China Railway Construction Corporation's indirect holding company, China Railway 11th Bureau Group First Engineering Co., Ltd., has announced contact numbers for wage arrears rights protection on WeChat and its official website.
"Daily Economic News" reporters contacted relevant people at China Railway Construction Indirect Holding Company who were familiar with this type of debt through multiple channels.
Faced with overdue payments to suppliers, the person in charge of letters and visits at a wholly-owned subsidiary of China Railway 17th Bureau Group emphasized to the reporter of "Daily Economic News" on July 10: It was not intentional default, but due to the complex "triangle" relationship and the tight capital chain caused by the owner's arrears.
The above-mentioned person in charge said that the cooperation between central enterprises and suppliers has always been based on payment in accordance with the contract agreement. He explained: "After we sign a contract with the supplier, we will pay according to the agreed payment ratio. At present, the payment ratio of most projects has reached 90% to 95%. The remaining balance usually needs to be paid to the supplier after the project is completed, waiting for the owner to return the warranty deposit, late payment fee and other funds."
However, the key problem is that the owner or project party did not pay the central enterprise in time. The above-mentioned person in charge admitted that the "triangle" relationship made the capital flow complicated, "the project party or owner owed us money, which made it impossible for us to settle the remaining balance or other related expenses with the supplier in time."
He gave an example, saying that a project of the company in Shanxi had been completed and opened to traffic for more than ten years, but the project owner had not paid the money. "The project owner delayed the payment on the grounds of temporary financial constraints, asking our company to slow down for a while." The person in charge said helplessly, "Such a situation is not a one-time thing, but a problem that has accumulated over the years."
According to him, the central enterprise has been owed hundreds of millions of yuan by the owners. These debts mainly come from infrastructure construction projects, and central enterprises often need to advance a large amount of funds in the early stages of a project.
At the beginning of the project, the central enterprise general contractor will pay 75% to 80% of the contract price to the supplier. However, due to the owner's financial constraints or difficulty in collecting payments, the remaining amount cannot be paid for a long time after the project is completed. "When the owner is short of funds or cannot get the money back, they will pass it on to us, and (the supplier) will sue us for not paying. For example, it is malicious not to pay or something, there is no such problem." He emphasized that it was not the general contractor's malicious default, but a helpless move caused by external factors.
In order to ease the financial pressure and pay suppliers as soon as possible, the central enterprise is currently actively coordinating the recovery of the balance. The person in charge said, "We are also raising funds through company bills, loans, etc., and gradually paying suppliers. Because the amount is large, we have to pay it bit by bit."
In response to suppliers' questions about the state of central SOE accounts, the person in charge responded clearly: "Our company's accounts are all open and transparent, and the court will conduct a detailed investigation before execution. There is no so-called empty account or hidden funds."
On July 10 and early August, a person in charge of media relations at another indirectly held company of China Railway Construction Corporation Limited said that the company was indeed facing difficulties: "First, we are actively negotiating relevant payment plans with small and micro enterprises. We have recently launched a special campaign and published a complaint hotline for supervision. Secondly, some cases announced by the court are controversial, and some are still in the appeal stage and cannot be determined." He further stated that state-owned enterprises are also "uncomfortable" being caught in the "triangle" relationship, and "most of the pressure is transmitted to us."
He further stated that the company has recently been vigorously carrying out special actions to solve the problem: first, the arrears of small and medium-sized enterprises are centralized to clear the debts. Most of the above cases involving dishonest persons subject to enforcement and "restrictions on high consumption" are completed projects. For cases where the court has already ruled to require payment, the company implements a special debt settlement plan for each case, determines the time node for repayment, and takes measures including negotiating installment payments. Secondly, the cases under execution have been adjusted from the previous completion settlement to the completion pre-settlement. The difference is that the completion settlement is based on a cycle of half a year or a year, and the payment is made according to the completion progress. The completion pre-settlement is to pay the payment according to the supplier's completion process. "How much (the project) has been completed and the quality inspection is qualified, I will give you the completion pre-settlement."
In addition to the factor of not receiving payment from the owner, he mentioned that another reason for the arrears of payments to small and micro enterprises is that general infrastructure projects involve a period of two to five years or even longer. During the process, there is a mismatch between the owner's payment progress and the project progress. "The owner's appropriation will not be paid at 100%. Usually a portion will be retained, and the proportion of phased payments to us is about 80%. We settle with the suppliers below in stages on a 100% basis." In other words, the general contractor has to find a way to resolve the 20% payment gap.
When the construction industry was in a good market, the general contractor could obtain funds by continuously undertaking project engineering. However, now, the general contractor will consider more project yields, and the number of projects undertaken will gradually decrease. In addition, under the constraints of funds, the current owner's bidding project model is also different from before. He mentioned a case where an owner wanted to build an infrastructure project. The owner would bring in a central enterprise to jointly invest in a new joint venture company. After completion, the joint venture company would operate the project and then hand it over to the owner after the operation period. In the past, the general contractor usually handed over the project to the owner after the project was completed.
Liu Qi (pseudonym), a person from a subsidiary of a central state-owned construction enterprise, also talked about a similar phenomenon in an interview with a reporter on July 25. "Many parties A are not in good financial condition. Once they have problems, we are also in trouble. The downstream suppliers or contractors will not go to the owners, but will definitely go to us. We have put in a lot of money. Because of the problem of capital flow in the past two years, the company has streamlined many leadership positions, and there have been small-scale layoffs. Salaries are often delayed by half a month from the scheduled time." Due to the delay in payment by project owners, construction companies will cause their own financial pressure to pay downstream suppliers. The industry situation in recent years has led to construction companies not easily using other funds for settlement, resulting in more arrears and lawsuits. Finally, he emphasized: "But no matter what, the wages of migrant workers will definitely not be delayed."
Liu Qi said that in public facilities and infrastructure projects, the prices are almost like charity, and there will be some losses occasionally. The repayment is generally slow, and once the project party is short of funds, it is difficult for the company to collect them. His company currently prefers hospital and school projects because the funds of such projects are used in a standardized manner and the repayment is relatively fast.
Lin Shuanglin, professor at the National School of Development at Peking University, is the honorary director of the China Public Finance Research Center at Peking University. He was a member of the State Council's Medical Reform Expert Advisory Committee and has extensive research on my country's fiscal, taxation, debt and other issues.
On July 17 and July 23, reporters from the Daily Economic News interviewed Lin Shuanglin via WeChat. Regarding the accounts receivable cases between China Railway Construction Corporation and China Railway Group Limited, two central enterprises’ indirect holding companies, and small suppliers mentioned in the above reports, Lin Shuanglin believes that the above cases reflect a specific problem currently facing my country’s economy - “chain debts”.
"Chain debt" is different from "triangle debt". The so-called "triangle debt" refers to the owner's failure to pay the general contractor in time, causing the general contractor to owe money to small suppliers.
"'Triangle debts' can be offset. A owes B 100 yuan, B owes C 100 yuan, and C owes A 100 yuan; everyone meets to discuss, and the debts are offset, so no one owes anyone anything. (In the above case) if it cannot be offset, the owner must repay the debt, and finally the small supplier gets the money. Three parties are involved, but it is not a 'triangle'." Lin Shuanglin said that in the above case, if the owner of the construction project is the local government, the arrears of project payment constitute a type of local government debt.
Lin Shuanglin said that although small suppliers are creditors, they are in a weak position. Owners, central enterprises and small suppliers should actively negotiate, formulate repayment plans and repay the debts as soon as possible.
At present, some local governments are expecting faster economic recovery to dilute their debts. Owners can take more active debt repayment measures, such as transferring part of their assets to repay debts.
Industry insiders revealed that the Ministry of Industry and Information Technology has public channels to monitor the issue of small and medium-sized enterprises being owed payments, and suppliers can report it directly.
The reporter found that there is a "Registration (Complaint) for Breach of Contract and Delayed Payment to Small and Medium Enterprises" on the homepage of the Ministry of Industry and Information Technology's government service platform, and those who are owed can register online.
In recent years, the Ministry of Industry and Information Technology has been organizing special operations to clear overdue corporate accounts to ease the financial pressure on small and medium-sized enterprises. On July 5, 2020, the State Council promulgated the 728th "Regulations on Guaranteeing the Payment of Funds to Small and Medium-sized Enterprises". When government agencies and institutions purchase goods, projects, and services from small and medium-sized enterprises, they must pay the money within 30 days from the date of delivery of the goods, projects, and services; if otherwise agreed in the contract, the payment period shall not exceed 60 days. In order to implement the "Regulations on Guaranteeing the Payment of Funds to Small and Medium-sized Enterprises", on December 30, 2021, the Ministry of Industry and Information Technology issued the "Interim Measures for Handling Complaints on Guaranteeing the Payment of Funds to Small and Medium-sized Enterprises". The aforementioned industry insiders said that the relevant parties have been actively dealing with the issue of overdue payments to small and medium-sized enterprises.
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