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in recent days, the topic of local debt has once again become a hot topic of public concern.

the cause was a red-headed notice from the bishan district government of chongqing city that circulated on the internet, which required the establishment of a special team to implement a work plan to promote the revitalization of state-owned assets.the purpose is actually very clear, which is to resolve local debt risks.

the risk of local debt has always existed and is not a new topic. the central government has previously conducted multiple rounds of governance. moreover, china's debt ratio is not too high compared with major economies in the world, and the risk is generally controllable.

but compared to statutory debt,in recent years, local hidden debt has become a more complex issue that has attracted more market attention.

in june 2023, the financial and economic committee of the 14th national people's congress pointed out in its report on the review results of the 2022 draft central government final accounts that some local cities and counties have high debt risks and new hidden debts are still occurring.

what is hidden debt? in the context of the gdp championship, local governments have a greater desire to accelerate development through financing. in addition, the central government has long required local governments not to issue bonds. most of the accumulated local government debts in history are hidden debts raised through urban investment as a carrier, that is, various bonds issued by local government financing platforms. in academia, the scale of urban investment bonds is generally used to replace the scale of local hidden debts.

in recent years, some municipal investment platforms have defaulted, the frequency of defaults has continued to rise, and regional credit conditions have collapsed. for example, in 2023, there were 235 records of defaults and risk warnings by municipal investment entities, of which 181 were non-standard defaults, involving a total of 97 municipal investment companies.

this sign itself is a warning.it is no wonder that since 2023, in accordance with the decision-making and deployment on "effectively preventing and resolving local debt risks and formulating and implementing a package of debt reduction plans", all relevant departments and local party committees and governments at all levels have been working hard to reduce local debt.

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to reduce debt, all we have to do is increase revenue and reduce expenditure.

let’s talk about open source first. in fact, it depends on where the government’s income comes from.

previously, apart from taxation, property income was an important channel for local governments to raise funds. however, with the slowdown in urbanization and the sluggish real estate market, the benefits of land finance have also weakened accordingly.how to find new growth points for fiscal revenue is a key issue when releasing local debt.

this brings us back to the issue of revitalizing state-owned assets. previously, there was a large gap between the income from state-owned assets and the income from land transfer, which also shows that the existing assets are likely not being fully utilized. for example, in 2022, the income from land transfer was 6.69 trillion yuan, while the budget income from state-owned capital operation was only 568.9 billion yuan, which is a big difference.

the work plans for resolving local debts recently launched by various places have similar paths, mainly repaying debts by activating existing assets.to put it bluntly, the government sells some assets for money and uses the proceeds to repay debts.

for example, the 2024 government work report of zhuozi county, ulanqab city, inner mongolia mentioned that the county has mobilized 14.896 million yuan in funds and recovered 6.5 million yuan through a major investigation, which will be used first for debt resolution and major project expenditures; in delingha city, qinghai province, the local sasac sorted out the effective assets that can be auctioned by the city’s eight state-owned enterprises, and sorted out 6 assets worth 112.6962 million yuan for auction.

actually,activating existing assets is a common idea and practice for local debt repayment and is nothing new.

generally speaking, the government's stock assets include three categories: the first is the physical assets of administrative institutions, such as idle houses and vehicles, idle properties planned and constructed by various governments, and land resources that are not efficiently utilized; the second is the financial assets of administrative institutions, including temporary fiscal deposits and payments, equity investment assets, etc.; the third is the assets of state-owned enterprises, including financing platform assets, etc.

however, in actual operation, there are many difficulties for local governments to pay off their debts. first, the "assets" to be revitalized are different, and their values ​​are also different. due to the different economic strengths of various places, the debt-paying capabilities of various places often vary greatly.

more importantly, in the view of some experts, local governments lack the motivation and willingness to sell assets, especially high-quality assets, and are even more reluctant to sell. in the end, it is often the case that “look at other provinces, and other provinces look at you, no one is selling.”

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precisely because “increasing revenue” is so difficult, “reducing expenditure” becomes even more important and urgent.

in 2023, the general office of the state council issued "document no. 47", the full name of which is "measures for strengthening the management of government investment projects in key provinces by category (trial)". this management method is actually one of the central government's "package debt reduction" measures to reduce local government debt risks. it mainly focuses on two aspects: one is to strictly control new government investment projects, and the other is to strictly clean up and standardize projects under construction.

the document also identified 12 key provinces for debt reduction, including tianjin, inner mongolia, liaoning, jilin, heilongjiang, guangxi, chongqing, guizhou, yunnan, gansu, qinghai and ningxia.

it is worth noting that the document uses the degree of project completion as the main measurement standard for the management of government investment projects. projects with a total investment completion rate below 50% will, in principle, be slowed down or stopped. projects with a completion rate above 50% but with major problems will also not be allowed to continue construction.

to put it bluntly,this is asking local governments to “not spend money that should not be spent.”

this regulation is not groundless. there are precedents for excessive and ineffective investment in various places. according to the anti-corruption special film released by the central commission for discipline inspection at the beginning of this year, during the three years that li zaiyong served as the party secretary of liupanshui, the local government's new debt reached more than 150 billion yuan, and he promoted the construction of 23 tourism projects, 16 of which were listed as inefficient and idle projects by guizhou province. due to blind debt, the debt interest alone caused a heavy loss of more than 900 million yuan.

certainly,this does not mean that the government has to reduce debt to the lowest level or even be afraid of the mention of debt.

after all, debt itself is a neutral concept. moderate government debt can make up for the shortage of construction funds, which is also an internationally accepted practice. debt of a reasonable scale and effective spending can actually promote economic development.

whether to spend money or how much to spend depends on whether it can be spent on the "cutting edge".