A Chinese property developer is suing six local governments for late payments on infrastructure contracts.
Yan Jiehe, founder of China Pacific Construction Group (CPCG), said the lawsuits are the first such action against local governments, the Financial Times reported Tuesday.
“We will appeal all the way to the Supreme Court if necessary,” Yan said. “We will surely win this case. The records and evidence are clear.”
Local government borrowing has risen steeply in recent years, with much new credit used to service existing debt, raising fears that local defaults could spark a full-blown financial crisis.
CPCG is China’s largest private sector infrastructure company in an industry traditionally dominated by state-owned enterprises.
Last year, it was ranked 166th on the Forbes 500 list of the world’s largest companies, with US$60 billion in annual revenue.
Yan was listed as China’s seventh richest person by last year’s Hurun report, with a fortune estimated at US$14.2 billion.
The lawsuits involve six municipal and county governments across the country.
So-called “build and transfer” infrastructure projects, in which CPCG specialises, accounted for about 8 per cent — or 1.5 trillion yuan (US$239.8 billion) — of total local government debt last year.
Last week, Ma Jiantang, director of China’s statistical bureau, highlighted local government debt as one of the greatest risks to the economy, which last year grew at its slowest pace in 24 years.
According to China’s National Audit Office, local government debt had reached 18 trillion yuan by June last year from 10.7 trillion yuan at the end of 2010.
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