In 2015, when Shangqiu, a central China municipality the size of Kentucky, mapped out a plan for the next two decades, it positioned itself as a transportation hub with an extensive network of railways, highways, and waterways.
By the end of 2020, Shangqiu had built 183 kilometers of high-speed railway, and currently, several national railways stop in the city.
By 2025, Shangqiu expects the coverage of its highway network to increase by 87%.
The city is building its first two airports, three new highways and enough parking lots for another 20,000 parking spaces.
The infrastructure spree is far from over.
On February 23, the Communist Party secretary of Shangqiu reaffirmed the city’s vision as a logistic powerhouse by entering into a new partnership with a state-owned investment company, which could help Shangqiu petition for borrowed money for even more projects.
That morning, the city’s bus operator announced that it would have to suspend its services due to financial difficulties.
The pandemic has hit it hard, the company said, and the Shangqiu government has failed to deliver the subsidies it promised.
Consequently, the company He hadn’t paid his employees in months and it couldn’t even afford to recharge its electric buses.
Within hours of publishing its announcement, the company removed it, after it made national headlines and intervention by the Shangqiu government.
China is full of Shangqiu.
As part of the ruling Communist Party’s push to stimulate economic growth this year, local governments, already indebted from loans to pay for huge infrastructure, are taking on additional debt.
They are building more roads, railroads and industrial parks even as the economic benefits of this activity are dwindling.
In their struggle to find the money to finance their new projects and interest payments on old ones, cities are cutting services public and benefits.
Shangqiu is one of more than 20 cities in China where bus services have been disrupted or threatened because local governments have failed to provide the necessary funds for operation.
Wuhan and other cities cut health insurance.
Others have cut the salaries of officials.
Many local governments in Hebei province, which borders Beijing, did not pay natural gas heating subsidies during the winter, leaving residents shivering during an unprecedented cold snap.
For nearly three decades, China’s local governments have been the envy of the world.
It looked like they did unlimited resources to build airports, highways and industrial parks, many of which were financed by land sales.
Now, many of them are in a dire fiscal situation.
post pandemic
In their determined “zero COVID” policy, local governments have depleted their coffers to comply with stringent policing, quarantine and lockdown regulations.
Firms in difficulty pay less taxes.
Property developers are reluctant to buy land after government crackdowns.
“Governments don’t have money to spend on basic services if land sales don’t increase dramatically,” says Victor Shih, an associate professor of political science at the University of California, San Diego.
“Local governments, especially in third- and fourth-tier cities, will continue to struggle to meet many of their budgetary obligations.”
According to official data, China’s 31 provincial governments owed an estimated $5.1 trillion by the end of 2022, a 66 percent increase from three years earlier.
A report by the International Monetary Fund puts the figure at $9.5 trillion, equivalent to half of the country’s economy.
But from the eagerness with which cities have embraced investment—China’s old playbook for economic growth—it’s hard to tell that they are deeply in debt.
The state media is full of news of new projects.
Guangdong, China’s largest province by economic output, has announced it will invest $1.2 trillion in 1,530 projects by 2023.
Henan, the province that includes Shangqiu, said it would spend $261 billion on 2,500 projects.
The problem is that these governmentThey don’t have the money.
In China, where the government owns virtually all the land, the main source of income for many cities has for years come from renting or selling properties to property developers.
But revenue from land sales fell by more than a fifth last year, according to the finance ministry.
All 31 Chinese provincial governments have recorded deficits due to “zero-COVID”.
Two-thirds of local authorities who borrowed money exceeded the debt thresholdsor official set by Beijing, having surpassed its outstanding debt at 120% of its income in December, according to S&P Global.
In Shangqiu, the government has not specified how it will finance its 701 projects by 2023.
He said last year his land sales revenue was half of what the city set out to make and that he had spent $1 billion on debt service.
In other words:
Shangqiu has used more than a third of its tax revenue to pay the interest on its debt.
This year, the authorities are confident of a sharp increase in land sales and some growth in tax revenues.
But Shangqiu has no plans to spend the money on public services.
Instead, the city plans to cut spending on education, health care, job protection, transportation and many other public services, according to budget documents on its website.
“We must protect and improve citizens’ livelihoods based on our economic growth and financial health,” the documents said.
China is full of expensive infrastructure that the government likes to brag about, but it’s of no use most urgent needs of the citizen.
The Chinese government likes to say that the country has the longest and fastest high-speed railways in the world.
But with the exception of a couple of lines connecting the megacities of Beijing, Shanghai, Guangzhou and Shenzhen, most are running below capacity and at heavy losses.
About 80% of China’s high-speed railways built in the past decade have been built remote and poor regionsChina State Railway Group said last year.
Zhao Jian, a professor at Beijing’s Jiaotong University, warned in an article that high-speed rail could become the “gray rhino” that would crush China’s economy, because many local governments borrowed heavily to build them.
But most of those railroads move people, not freight.
So they would only make sense in densely populated areas where people were willing to do it pay more for speed.
Local leaders are interested in infrastructure projects because their economic benefits, even if minimal, are immediate:
people get construction jobs and companies get construction contracts.
This short-term approach dominates China’s political system, where cadres fan out to race towards the goal set by their leader regardless of the financial or human cost.
The Shangqiu government boasts that there are about 14 square meters of green space for each of the 2.3 million residents in the city’s central municipal area.
One of Shangqiu’s biggest infrastructure projects this year is a swamp park.
After building many highways to nowhere, local governments have spent heavily on urban beautification projects in recent years.
It’s nice to have green spaces for everyone.
But, like most cities in inland China, Shangqiu is not rich.
Its graduates complain on social media that it’s hard to find a job that pays more $300 a month.
Its basic pension provides its seniors with $17.80 a month, after an increase of $1.50 this year.
Many Chinese who are at least 60 years old live on pensions like this.
According to official data, $54,000 million in basic pensions were distributed to more than 162 million people in 2021, about $28 a month on average per person.
Residents would probably prefer the government to spend on unemployment protection, bus service and welfare rather than high-speed rail and green spaces.
Shangqiu is far from being an exception.
In February, a resident of Pucheng in the northwestern province of Shaanxi complained on the local government’s online bulletin board that there was no bus service between downtown and the train station.
“This is the most basic public service,” wrote the resident, who signed under the name Li Hongbo.
“I feel that people’s livelihoods have deteriorated. I hope the leadership will pay attention to this.”
c.2023 The New York Times Society
Source: Clarin
Mary Ortiz is a seasoned journalist with a passion for world events. As a writer for News Rebeat, she brings a fresh perspective to the latest global happenings and provides in-depth coverage that offers a deeper understanding of the world around us.