Ministry of Finance Photo: VCG

China's Ministry of Finance on Friday released six typical cases of accountability related to hidden local government debt, part of ongoing efforts to strengthen fiscal discipline and crack down on illegal borrowing. The cases involved a total of 141.01 billion yuan ($19.4 billion) in off-budget liabilities, with responsible officials held accountable.

The Communist Party of China Central Committee and the State Council attach great importance to preventing and resolving the risks of local government hidden debt and explicitly require lifelong accountability and retrospective investigation of those responsible for hidden debt issues, the ministry said in an online post.

In recent years, the Ministry of Finance, together with relevant departments, has continued to increase its efforts, persistently maintained a high-pressure situation, and seriously investigated and dealt with illegal and irregular behaviors such as the increase of hidden debts, underreporting or omission of hidden debts, and false resolution of hidden debts, and promoted the accountability of relevant local governments and departments in accordance with laws and regulations, it said.

In one case revealed on Friday, Liaozhong District in Shenyang, Northeast China's Liaoning Province, incurred 520 million yuan in hidden local government debt. In March 2023, a farmland development company in Shenyang borrowed the funds from the Liaozhong branch of the Agricultural Development Bank of China to finance a farmland upgrade project. The district government pledged to repay the loan using proceeds from grain production quota transactions, in violation of regulations. Disciplinary actions were taken against multiple officials, according to the ministry. 

In Xiamen, East China's Fujian Province, a local state-owned investment company incurred a total of about 68.4 billion yuan in hidden local government debt by advancing funds for multiple urban development projects without proper budgetary approval. Between July 2020 and June 2023, the company funded seven urban renewal projects involving primary land development at the request of municipal authorities, resulting in 57.9 billion yuan in hidden debt. Beginning in November 2020, it also advanced 4.4 billion yuan for the first phase of a core-area development project in the Tongxiang High-Tech New Town. 

Separately, starting in October 2019, the company, along with a local real estate subsidiary, financed the construction of 32 resettlement housing projects for displaced residents, generating an additional 10.1 billion yuan in off-budget liabilities.

Multiple officials were disciplined in connection with the case, including a former vice mayor, senior officials from the city's finance and housing departments, and executives of the state-owned investment company involved. 

In Lingcheng District of Dezhou, East China's Shandong Province, local authorities approved a financing arrangement in June 2023 allowing a Dezhou-based agricultural investment company to borrow funds for the construction of 114,500 mu (7,630 hectares) of high-standard farmland - a project that should have been financed through the government budget. By June 2024, the company had used a 145-million-yuan loan from the local branch of the Agricultural Development Bank of China to pay for construction, resulting in an equivalent amount of hidden local government debt. 

Several officials, including the former district head, deputy heads, and officials from the agriculture and finance bureaus, as well as the company's general manager, were held accountable through Party and administrative disciplinary actions.

In Wuhan's East Lake High-tech Development Zone, Central China's Hubei Province, authorities approved off-budget financing for public infrastructure and construction projects that should have been government-funded, resulting in 10.385 billion yuan in hidden debt. Between May 2020 and June 2023, four entities advanced 8.32 billion yuan to build 16 public projects under instructions from local authorities. In a separate arrangement starting in June 2021, another Hubei-based company formed a joint venture with private capital to finance, construct, and operate 25 infrastructure projects, with the public side agreeing to repurchase full equity after project completion, adding 2.06 billion yuan in hidden debt. Several officials, including the former Party secretary and the director of the zone's administrative committee, were disciplined.

In Wulong District of Southwest China's Chongqing Municipality, 160 million yuan in hidden local government debt was created through internal borrowing to fund infrastructure development in a local tourism area. In December 2022, a scenic area management committee in Wulong approved the allocation of 160 million yuan to a tourism development company for infrastructure construction. To enable this, the committee borrowed the funds from a Chongqing-based tourism group, deposited them into a custodial account under the district finance bureau, and then transferred the money to the developer. Several officials were held accountable, including the former deputy head of Wulong District and Party secretary of the committee.

These cases have exposed the fact that some local officials have a misconceived view of political achievements, seriously undermining the effectiveness of efforts aimed at preventing and resolving hidden debt risks, the ministry said, vowing to continue to strengthen the investigation, punishment and accountability of hidden debts, and effectively prevent and resolve local government debt risks.

Global Times