1/5
"The Ministry of Finance said government-backed entities would be strictly prohibited from purchasing land by raising debt last week, describing the practice as a 'sham'."
The MoF is right, of course, but this doesn't address the original problem.
sc.mp/vr9c?utm_sourc…
"The Ministry of Finance said government-backed entities would be strictly prohibited from purchasing land by raising debt last week, describing the practice as a 'sham'."
The MoF is right, of course, but this doesn't address the original problem.
sc.mp/vr9c?utm_sourc…
2/5
Allowing local governments to reverse the decline in land-sale revenues by setting up SPVs to buy land from themselves was simply a way for them to borrow money and pretend the proceeds were actually land-sale revenues.
Allowing local governments to reverse the decline in land-sale revenues by setting up SPVs to buy land from themselves was simply a way for them to borrow money and pretend the proceeds were actually land-sale revenues.
3/5
This was extremely risky because among other things it meant that local governments were effectively doubling down on their already-excessive exposure to the real-estate market. The MoF was absolutely right to clamp down on this practice.
This was extremely risky because among other things it meant that local governments were effectively doubling down on their already-excessive exposure to the real-estate market. The MoF was absolutely right to clamp down on this practice.
4/5
But local governments are desperate. Their revenues have dropped sharply even as their expense have risen. What is more, they are expected to fund a wave of growth next year. The MoF stopped them from faking revenues without addressing the reasons they had to do so.
But local governments are desperate. Their revenues have dropped sharply even as their expense have risen. What is more, they are expected to fund a wave of growth next year. The MoF stopped them from faking revenues without addressing the reasons they had to do so.
5/5
Beijing must know how difficult the circumstances are that local governments face, and yet isn't doing much to help. I think we are probably seeing the beginning of what over the next few years will be a very contentious relationship between local governments and Beijing.
Beijing must know how difficult the circumstances are that local governments face, and yet isn't doing much to help. I think we are probably seeing the beginning of what over the next few years will be a very contentious relationship between local governments and Beijing.
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