Sun, 24 Sep 2023

Hong Kong, May 29 (ANI): Largest city in central China -- Wuhan -- has publicly demanded that hundreds of local companies repay their debts, in an extremely rare move that highlights the dire financial situation many of the country's municipal governments are facing amid economic uncertainty, CNN Business reported.

The city's finance bureau said in a Friday statement published by the official Changjiang Daily newspaper that a total of 259 companies and entities owed it more than 100 million yuan (USD 14 million) combined. It urged them to pay their overdue debts as soon as possible.

The debtors or guarantors include state or privately-owned companies, government departments and think tanks, according to official media outlets quoting a screenshot of the newspaper.

The finance bureau said it was unsuccessful in collecting the debts and was offering rewards to anyone able to provide useful information about the debtors' financial assets.

The public announcement by Wuhan, which was at the epicenter of the COVID-19 pandemic that began in late 2019, is highly unusual and underscores the fiscal challenges facing China's local governments.

Chinese leader Xi Jinping's zero-Covid campaign has exhausted the budgets of many cities and provinces, after they spent billions of dollars on frequent Covid lockdowns, mass testing and quarantine centres before last December's policy U-turn. According to CNN Business, a real estate crash has exacerbated the problem, as local governments rely heavily on land sale revenues.

Analysts estimated China's outstanding government debts surpassed 123 trillion yuan (USD 18 trillion) last year, of which nearly USD 10 trillion is so-called "hidden debt" owed by risky local government financing platforms.

Due to tightening budgets, some cities have already slashed medical benefits to seniors, which sparked protests, according to CNN Business. Other vital services are at risk.

Wuhan's debt collection announcement came just days after the official financing arms of Kunming, the capital of Yunnan province, struggled to raise enough money to pay what they owed their bondholders. Yunnan is one of the most indebted provinces in the country, with its outstanding debt to fiscal income ratio hitting more than 1,000 per cent last year, CNN Business said.

Wuhan and Kunming are not the only city governments revealing the extent of their debt problems. According to CNN business, Guizhou, one of China's poorest provinces, publicly admitted defeat in April in trying to sort out its finances and appealed to Beijing for help to avoid default.

In Wuhan, the debtors included major companies such as Dongfeng Wuhan Light Vehicle, which is controlled by the city's state asset regulator, and Uni-President Enterprises, a Taiwanese food and beverage giant with significant operations in mainland China. (ANI)

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