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Economy: City Investment Corporations Cannot Pay Their Obligations

In China, many local governments have set up their own investment companies. These companies usually use the land as collateral to get loans from banks to invest or finance the construction of infrastructure projects or government-subsidized housing.

However, due to the collapse of the real estate industry in China, many of these city investment corporations are short of money and some cannot even pay their obligations.

Phoenix Finance reported that in the past year, people buying government-subsidized housing reported the delay (or even failure) of delivery of those houses. This has happened in Shenzhen City, Guangdong Province; Qingdao City, Shandong Province; Zhengzhou City, Henan Province; and Baoding City, Hebei Province.

Chengyang District, Qingdao City, Shandong Province provided an apartment subsidy to attract skilled/talented people to come to the city. On a jointly-owned housing program (government pays a portion to reduce the purchase cost for the talent they are bringing in), the talent paid 1.5 million yuan (US$220,000) but the Chengyang Municipal Investment Group did not pay the government portion of 760,000 yuan, and thus the talent could not get an apartment. (After the Phoenix Report, Chengyang Municipal Investment Group said they had gathered enough money to pay for their dues.)

People pointed out that this showed the government has run out of money. These investment companies cannot raise more money because land is no longer hot property – builders are not willing to buy land from the government (thus paying the land transfer concessions) anymore.

Since November 2021, the number of bonds issued by the city investment corporations that missed the payback on the due date has increased from five per month to around 20 per month.

An unconfirmed report said that to sell their apartments, some city investment corporations assigned quotas to their employees and tied it to their annual reviews.

1. Phoenix, February 2, 2023
2. Sohu, February 3, 2023
3. Sina, February 4, 2023