In a rare admission by a Chinese municipal official, a Guangzhou vice mayor revealed at the end of November that the city government’s aggregate debts had piled up to 259.3 billion yuan (US$42.71 billion) as of this June, and that repayment would have to count on just a few sources of income such as land sales.
The figure is a definite worry as the city’s disposable fiscal income last year stood at just 110.2 billion yuan.
The sheer size of the debt can easily spook observers — given the city’s population of 12 million, every Guangzhou resident is effectively saddled with a debt of 21,000 yuan if calculated on per capita basis.
The southern municipality is the very epitome of Chinese cities that have resorted to excessive borrowing from banks or through government financing vehicles to fuel reckless city expansion projects and mega events in the past decade. Local authorities, for instance, splurged 300 billion yuan for hosting the Asian Games in the city in 2010.
But the vice mayor pledged that “Guangzhou will maintain sound relations with various lenders for flexible debt and interest payment arrangements, and that more than 60 percent of all the debts will be repaid by 2016 with prudent austerity measures”, the Economic Observer reported.
That said, some figures, also from the municipal government, point to the opposite. The city’s director of audit voiced grave concern earlier that the total debts, including those incurred by the city’s district and county governments which are stretched with large-scale infrastructure projects and are still reeling from the cost of holding numerous events, would further increase by 10.5 percent this year over the 2012 level, while the disposable fiscal revenue for the year is projected to grow by less than 10 percent.
This has prompted many analysts to put a big question mark on the vice mayor’s optimistic judgment. And, Guangzhou may face fiercer headwinds as the general economic climate is likely to remain lukewarm and land sales, on which it depends for the bulk of its income, may lose momentum due to land scarcity and stepped-up clampdown on housing speculation.
Guangzhou Daily reported that the city’s land sales soared more than twofold in the first half this year to 30.71 billion yuan, representing 56 percent of Guangzhou’s fiscal revenue in the period. But the inconvenient truth is that the city may run out of fresh land in less than seven years should the current speed of land sales continues, as the local land resources and housing bureau has warned.
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