[Text: Observer Network columnist Feng Chuan].
I. Introduction. According to data released by the Ministry of Finance on January 30, as of the end of December 2023, the balance of local ** debt across the country was 407373 billion yuan. Among them, general debt is 158688 billion yuan, and special debt is 248685 billion yuan; **Bonds 405711 billion yuan, and non-**bonds in the form of existing debts 166.2 billion yuan.
From the perspective of the hierarchical structure of local financial liabilities, some counties have the highest proportion of liabilities. The overdraft performance of financial credit is insolvency and debt overdue default.
There are institutional and policy reasons why financial credit has become the object of overdraft.
In terms of system, on the one hand, the loan behavior of county ** to banks and other financial institutions lacks a hard budget constraint mechanism and a debt review, supervision and recovery constraint mechanism, so the county ** does not have to bear responsibility for bank credit risk. In the context of the short-term goal of "one county head and one political performance", each leader does not have to be responsible for the risks existing in the long-term development of the local government, because the debts borrowed during the term of each leader can be left to the next leader to repay. The overdraft of financial credit will not only not affect their promotion, but will allow them to be promoted due to their bright political achievements. This kind of disunity between the rights obtained through financial credit overdraft and the credit repayment responsibility will inevitably cause the county's ** preference for financial credit overdraft.
On the other hand, China's commercial banks are all state-owned, and in the past, even if state-owned banks lend non-performing loans to state-owned enterprises, they will be stripped away, and local governments will not go bankrupt due to debt problems under the role of financial support. Therefore, the risk of banks lending to local ** is almost zero, and these financial institutions will competitively issue loans to local **.
In terms of policy, before the 2015 revision, the "Budget Law" clearly stipulated that local governments were not allowed to issue local bonds and that the budget could not include deficits, which limited the financing tools of local governments and closely linked their financial credibility. Where there is an urgent need to borrow, ** is highly dependent on bank credit and financial leverage. After the implementation of the new Budget Law in 2015, the scale of interest payments on high-value local bonds is not small. In 2023, the interest paid on local ** bonds will be 1,228.8 billion yuan; Last year, this data was 1,121.1 billion yuan, exceeding one trillion yuan for the first time, almost double that of 2019. According to a report, the proportion of interest payment expenditure on local ** bonds in local comprehensive financial resources has risen from 3% in 2019 to about 4% in 2022.
However, local balance limits are limited, so it is also necessary to resolve the risks of local bonds such as urban investment bonds through financial measures such as bank loan extension and interest rate reduction, loan replacement for mature bonds, etc. Under the expectation of the transfer of debt repayment responsibility, the awareness of debt risk self-control of local ** is insufficient. Bank loans can only pay interest without repaying the principal, while the local government has little pressure to pay only interest, and the principal will become a small debt in the future. Therefore, interest-only principal payment is a viable loan option.
Although the county ** mobilizes financial resources and magnifies the financial gap, theoretically it can further transfer the gap to the higher level and ** by mobilizing the resources of the higher level and even the first level. But the consequence of monetizing the dilution of debt stress is to trigger inflation and chaos in the economic order.
In addition, although the overdraft of financial credit at the county level has led to a structural mismatch between the term of the bank loan and the return period of the investment project to a certain extent, the county can theoretically extend the loan term by extending the loan term or repaying the old loan, and the debt used for the construction of infrastructure projects can improve the basic conditions, increase the enthusiasm of enterprises for investment, and finally enhance the ability of the county to repay debts and resolve debt risks. However, in fact, for most of the counties in the central and western regions that lack resources and location advantages, due to the relatively small economic development potential and limited space for real estate appreciation, large-scale urban construction investment is also difficult to convert into the development of the county economy and the solvency of the county.
However, whether it is an extension of interest rate cuts or replacement, after all, it only lengthens the maturity of the debt and lowers the interest rate, and the balance of local full-caliber debt has not changed and still needs to be resolved. With the slowdown in the growth of fiscal revenue and land revenue, local financing platforms have entered the peak period of debt repayment, and once the financial credit of the county ** is overdrawn, it may cause a systemic impact on the banking and financial system.
The author's recent survey found that the large-scale urban construction investment in many counties in the central and western regions did not enter the productive field, but flowed into the public welfare field. Inputs do not bring corresponding outputs, resulting in a lot of waste of resources. These counties are all places of net outflow of population, and the construction and maintenance costs of commercial centers, large parks, large squares and other projects cost billions or even tens of billions of yuan, but the utilization rate is extremely low, and it is impossible to reverse the situation of net outflow of population, and it is difficult to promote the improvement of local productivity.
Data map**: Xinhua News Agency.
The following will take Q County as an example to analyze the logic of overdraft operation in the county.
2. Observation and evaluation to promote urban construction: the dynamic mechanism of operating the county.
The municipal level does not stipulate the specific projects created by county-level cities, but will formulate assessment methods to evaluate and evaluate the creation of county-level cities. If they continue to lag behind in the ranking of urban infrastructure, county-level leaders need to make a statement at the municipal meeting.
Even though the ** regulations do not allow assessment and evaluation, assessment and evaluation now exist more in the name of "observation". Every year, the secretary of the municipal party committee and the mayor personally lead the members of the four major groups, together with more than a dozen cadres of the municipal departments, as well as the secretaries of the county party committees and county magistrates of each county, take several large cars to inspect the urban construction of each county and assess the contribution of the county-level leaders to urban construction.
The "Observation" activity is subordinate to the "Hundred Cities Quality Improvement" activity. For many middle-level cadres in Q County, they don't know whether the "Hundred Cities Quality Improvement" activity was initiated at the provincial level or at the source, they only know that this activity has been carried out locally for more than 3 years.
The core of "100 cities to improve quality" is to change the appearance of the city. For the county, the "observation" assessment of "100 cities to improve quality" is very important, which belongs to the comprehensive target assessment that focuses on economic goals. As long as you get a good ranking in this assessment, other special assessments are easy to deal with.
Under the pressure of "observation" and evaluation, in order to compete for the advanced, all counties can only "go to the project" and set up a county-level urban construction leading group (without an office), and the secretary of the county party committee will personally grasp the implementation of the work. On the eve of each "observation" assessment, the ** office is responsible for notifying the relevant departments to hold a temporary meeting and divide it into several groups, each group is specifically responsible for dealing with a specific link of the "observation" assessment.
Generally speaking, it takes half a month to a month to prepare for the "observation" in the county. Of course, sometimes the "observation" will be postponed because the municipal leaders are busy with official business, and there will also be delays for several months. For example, in 2020, the "observation" was usually held around March, but in 2020, it was postponed to August, but in fact, the "observation" was not held until September. Because of this, in fact, the county needs to plan and prepare for the specific work of "observation" throughout the year, and plan the work arrangements for the coming year in advance.
According to the cadres of the Housing and Urban-Rural Development Bureau, the highlights of the city's "observation" are all-round, including urban facilities such as schools and hospitals, as well as urban management, health, markets, transportation construction and so on. At the same time, the municipal leaders will change the focus of the inspection project every year according to the changes in the focus of attention and the urban construction task, "I will not look at it this year and next year". For example, for Q County, the three key inspections in 2020 are "renovation of old residential areas", "urban public service facilities projects (parks, roads)" and "urban housing construction projects (real estate development)". These inspections are scheduled in advance each year.
3. Financing and production debt risk: the overdraft mechanism of the county.
Under the pressure of "observation", in order to change the appearance of the city, X County, which has a population of 1.14 million in the same province as Q County, invests more than 20 billion yuan every year, although the county's annual fiscal revenue is only more than 1 billion. The cadres of Q County bluntly said that X County simply "spent all the money after 100 years". In contrast, Q County, with a population of 510,000, needs to invest 1 billion to 2 billion yuan per year in urban construction, and the annual fiscal revenue is also more than 1 billion yuan, including transfer payments and project funds.
In addition to the 300 million yuan of compensation for the construction and demolition of highways and national roads, the urban construction investment in Q County also includes the construction costs of some key projects, such as the construction costs of schools and hospitals. The construction fund of the first high school in the county is more than 100 million yuan, more than 20 million yuan has been invested in changing the old county party committee into a regular kindergarten, and more than 200 million yuan has been invested in the hospital in the new district.
However, the project funds from the higher level are "all minor repairs and small supplements", the special projects are clear, and then they are concentrated in the tens of millions, which can only be promoted. Therefore, new schools, kindergartens, and hospitals all depend on the county's financial investment. Once the county's financial investment demand exceeds the financial capacity, the excess can only be solved by means of first-class financing - the so-called "financing", the essence of which is to overdraft the future.
There are probably two financing methods for counties: one is the issuance of special bonds at the provincial level, and the other is through urban investment companies.
In the past three years, bond issuance has been decentralized to the provincial level. In 2017, a small amount of "general bonds" were issued, and their financing was used for the construction of public welfare facilities, which were repaid by the county treasury from the general budget. Starting in 2018, "special bonds" will be issued for the construction of income-generating projects. The issuance amount of "special bonds" has increased year by year, and the direction of support has changed, and its purpose is to guide the county to build and operate projects that generate income.
The use of special bonds, first declared by the department, the county development and reform department according to the needs of the county's social and economic development of the overall screening, by a city accounting firm as a third party, and the provincial organization of the expert jury to jointly evaluate the feasibility and benefits of the audit. The county-level use of "special bonds" for financing, which is equivalent to provincial and ** loans for the county-level loan, and the final debt must be repaid by the county level - interest should be repaid every year for 15 years, and the principal should be repaid in a lump sum after 15 years. Q County used "special bonds" to build a new district hospital1500 million.
The urban investment company is also a tool for financing, which is responsible for integrating finance, banking, PPP (** and social capital partnership) together, and then spreading the debt to the enterprises under the various bureaus to contract the project. At present, Q County has borrowed more than 1 billion yuan from the China Development Bank and the Agricultural Development Bank through the financing platform. In the 2018 audit, the county treasury has a debt of 3 billion, including 1 billion due to the issuance of general bonds, of which the interest is 30 million per year.
The problem now is that the financial resources are not enough, but the construction is still underway. A considerable part of the projects built by financing are "public welfare projects", such as urban roads, parks, etc., which cannot generate income, and the debt problem ultimately needs to be covered. After the urban investment company raises funds through whitewashed statements, packaging projects, virtual profits, etc., the investment forms a large number of public welfare assets and ineffective assets, which also forms a vicious circle of investment and financing activities and debt burdens of urban investment companies.
Data map**: Xinhuanet.
Subject to the large demand for local funds and the difficulty of financing, coupled with the shortcomings of urban investment companies in market operation and talents, under normal circumstances, local ** do not support urban investment companies to carry out industrial investment and business activities, especially cross-regional business activities, and sometimes even set restrictions on urban investment companies' investment and operation projects. This limitation has directly led to the stagnation of urban investment companies in industrial operation and investment. In addition, the tolerance for investment mistakes of state-owned enterprises is extremely low and the accountability system is strong, which also leads to the fact that urban investment companies can only maintain the continuous investment, operation and maintenance of existing infrastructure, and have no more income and income-generating channels to reduce debt, reduce debt, and reduce their own debt.
At present, there are 3 more in Q County500 million will be borrowed through the city investment company. However, the company currently has few assets, and the bank does not agree to lend due to the rule that it is not allowed to add new "hidden debt" since 2018. As a result, the urban investment company is now preparing to expand its assets, such as the best stock housing, as well as other assets such as reservoirs and idle land, and also charge a little bit of industry to meet the bank loan standard. Once the urban investment company reaches the 2A rating, it can issue bonds on its own.
In some places, urban construction projects are managed by the Housing and Urban-Rural Development Bureau, hoping to mobilize the enthusiasm of the Housing and Urban-Rural Development Bureau, seek financial support from higher-level authorities, or borrow money themselves. Before 1998, the Housing and Urban-Rural Development Bureau of Q County also had subordinate enterprises, which were responsible for undertaking 7-8 urban construction projects in a year, but also faced some debt problems. After institutional reform, Q County's urban construction projects have been assigned to various bureaus and commissions, such as:
the Department of Transportation, which is responsible for the construction of urban roads and has its own company; The urban water supply company (a formal enterprise) is responsible for urban water supply and drainage and sewage treatment; the Municipal Utilities Authority (Council), which is responsible for the repair and greening of municipal facilities; Chengtou Company, responsible for the construction of hospitals in the new district; the County Agency Bureau, which administers affordable housing and low-rent housing; the power supply company, which is responsible for the management of the power system; The county housing and urban-rural development bureau is responsible for managing some roads, parks, public projects, street lights, etc., and it has no assets and subordinate companies.
Now there are more urban construction projects every year, increasing to dozens. This part of the content responsible for the Q County Housing and Urban-Rural Development Bureau accounts for less than 30% of the county's investment. For these projects managed by the Housing and Urban-Rural Development Bureau of Q County, the Housing and Urban-Rural Development Bureau itself is "not at home".
The decentralized management of urban construction projects has played a role in diversifying debts. At present, some bureaus in the county are more or less in debt. For example, the enterprises under the Transportation Bureau owe 200 million; Enterprises under the Urban Management Bureau owe tens of millions; The council also has debt, just not too much. If it weren't for decentralized management, "if you get together and ask for money, you won't have a good year".
The typical legacy problems of urban construction in Q County: first, the unfinished projects formed by the enterprise's foreign debts and the rupture of the capital chain, the problem of unfinished buildings is relatively easy to solve, after all, the property rights are clear; The second is that the land acquisition work of the problem real estate cannot be advanced because the compensation standard cannot be agreed, although the area involved is not large, but it is also difficult to resolve, and strong measures must be taken. However, the county ** and sub-district offices, which were originally the leading units, often did not want to intervene after encountering problems, and the Housing and Urban-Rural Development Bureau, which did not advocate blind development of real estate, was forced to participate in the resolution of contradictions when the problems were resolved in the later stage. These problems will make the county's debt worse.
In the view of the cadres of Q County, the urban construction of Q County has not yet occurred the problem of excessive investment, but two centers have just been built adjacent to the old city. At present, the built-up area of Q County is more than 20 square kilometers, the framework of the built-up area has been opened, and the main roads, pipe networks and other important infrastructure have been configured. At present, they have three options: snowball, build a new district, and develop it in one piece. They believe that it is easy to see benefits from "developing in one piece", while "pulling the framework is the most difficult, the initial investment is large, and it is necessary to invest in important infrastructure, and the benefits are small; In the future, fill in the big projects and slowly complete the projects, and the pressure will be less." They are not worried about the debt problems generated by urban construction. They are counting on "running the county" to effectively deal with debt risks.
Fourth, the operation of the county is unsustainable: non-tax revenue and tax revenue shrinking.
* and the provincial level tried to promote the county ** to operate the county through the issuance of "special bonds", and the county ** cadres counted on the operation of the county to deal with debt risks, so the business logic of "debt arrears-operation-debt repayment" was formed. However, whether the operation of the county is sustainable is a question worth asking.
For the general county management, "tourism resources" is not a reliable business fulcrum. Q County has a little tourism resources, but it is not outstanding, at most it is to build a characteristic commercial town, develop some restaurants and other commercial stores, and its scale cannot drive the increase of financial revenue.
Specifically, the operation of the county seat is mainly to obtain non-tax revenues such as land transfer fees, fines and confiscation revenues, and administrative fees brought by the "development of real estate", as well as tax revenues brought by the "construction of industrial parks". According to the data of the Q County Finance Bureau, in 2019, Q County was 12Of the 2.6 billion fiscal revenues, tax revenues accounted for 62 percent and non-tax revenues accounted for 38 percent.
Among the non-tax revenues of Q County's finance, the largest part of the income** is the land transfer fee. In the county seat of Q County, there are now at least 10 real estate projects under development, most of which are high-rise real estate. There are more than 20 properties in total, the earliest of which was developed in 2006. The real estate developed in the first half of 2019 allowed Q County to obtain a land transfer fee of 1 billion yuan, and most of these real estate projects have been sold out. In 2020, the county finance received another 1.3 billion yuan in land transfer revenue.
Those from rural areas are the main body of real estate purchase in the county. They regard the purchase of houses in the county as a kind of life-improving consumption. According to **, 2020 is a "small peak" for home buying in a county, and in another 3-5 years, the county's real estate market will be saturated. As a result, many property developers are now eyeing opportunities in the coming years. It is not sustainable to rely on "real estate development" to run a county town in order to obtain land transfer money.
Data map**: Xinhuanet.
In 2019, Q County obtained 40 million in the revenue from fines and confiscations. Among them, the public security department contributed 1 3, mainly from the traffic management department, and it can reach 10 million in many cases. When the environmental protection policy was greatly adjusted, the industrial and commercial administration department contributed 1 million to 2 million, and the land department contributed 2 million to 3 million. Due to the closure of factories due to environmental protection, it is now difficult for the industrial and commercial departments and land departments to fine so much money. Due to the intensification of the control of excess, the traffic management department can only fine a few million.
These departments used to be self-supporting institutions, but now they have all been converted into full-supply institutions. The recovery of departmental fines and confiscation rights reduces the operational attributes of local administration, which is conducive to transforming profit-making behavior into public behavior, rebuilding administrative legitimacy, and promoting industrial and social transformation, but it further increases the financial burden.
Administrative charges, in 2019 Q county achieved 1500 million, mainly land cultivated land reclamation fees, nearly 100 million. It includes more than 60 million income from the increase and decrease of linked indicators. This income fluctuates greatly every year, and this fee is charged more when the enterprise occupies an area and the project is developed and constructed. From 2017 to 2018, the county's indicators can be listed and sold for 1-200 million yuan in provincial capitals. But at present, there is too much supply of indicators, forming a supply queue, the supply competition is fierce, and the indicators are not sold and worthless - "Now the county is building its own and adding some construction land, so it will use it itself." ”
State-owned capital income, in 2019, Q County achieved more than 60 million. It basically comes from the dividends of state-owned capital enterprises. Among them, state-owned cement factories have dividends of more than 20 million, two private stone processing plants have dividends of more than 30 million, and rural commercial banks have dividends of several million. However, with the increase of environmental protection efforts, the production costs of cement plants and stone processing plants have risen, which directly affects the income and dividend amount.
In general, in addition to the state-owned assets from the rental of state-owned assets, mine auctions, mining rights income, the income from the paid use of resources, and the education surcharge of 2% of the total amount according to value-added tax and consumption tax, the ability of the county to obtain other non-tax revenues through operation is gradually declining.
So, what about the way to get tax from operating an "industrial park"?
Q County operates industrial parks and has developed several leading industries, but most of them have come to a standstill or shrunk. The cadres in the county took stock of these industries one by one to the author:
1) Door accessories industry. It once attracted dozens of companies with too much investment, but sales have not been good in recent years;
2) Violin industry. It is a processing project with small investment and high technical content, and is mainly exported. There are 10-20 enterprises that barely lose money;
3) Building materials industry. It turns out that the added value is relatively high. However, in recent years, the "pollution prevention and control battle" has been carried out, and industries such as minerals, white ash, cement, small stones, and brick factories have to be upgraded, and many factories are in a state of semi-shutdown, which seriously affects the efficiency of the building materials industry, of which the mine shutdown can reduce 100 million income a year;
4) Machinery industry. Production of environmentally friendly dust removal equipment and automobile wheels. The benefits are good, but the scale is small. The annual income is 10 million to 20 million, and the tax revenue is 2 million, which is insignificant.
It can be seen that unless the industry is embedded in the world economic cycle, in the context of strict implementation and normalization of environmental protection policies, the risk of building industrial parks in the county is large, the volume is small, and it is difficult to contribute long-term vitality to the operation of the county. Once the tax source of the county is not stable, it will be difficult to continue to "run the county" by relying on the market, and even form a vicious circle of "debt-operation-debt-debt".
Data map**: Xinhuanet.
5. How to resolve urban construction debts? Dangerous transfer payment fallback logic.
If it is difficult to operate the county, the only way to resolve the urban construction debt is to rely on transfer income, which means that the debt resolution will eventually turn into the logic of the bottom line.
In 2019, the transfer income of County Q is composed of the following parts:
1) Equilibrium transfer, 600 million (800 million, 200 million on the solution, incremental sharing). Transfer payments from fee to tax, business tax to value-added tax, tax reform, large capital adjustment (wage increase), and annual increase.
2) Special transfer payment, more than 100 million. Q County is an old revolutionary base area with many military garrisons, and this cost increases every year.
3) Special transfer payment, more than 1 billion. Among them, nearly 200 million are education, more than 200 million are social security (mainly medical and health care, more than 80 million subsidies for the new rural cooperative cooperative system, public health and pension), and nearly 100 million subsidies for agriculture, forestry and water (planting).
4) General transfer payments, more than 1 billion.
Once the transfer income cannot resolve the debt crisis caused by urban construction, it is not far from the brink of global fiscal collapse.
Through the formation mechanism of the county's financial crisis, we can further understand the key principles that should be followed in the county's economic development:
The first is to correctly assess the development capacity of the county.
In the process of promoting urbanization with county towns as an important carrier, county-level counties with weak financial resources are more likely to have high debt problems. As a net outflow of population, the county economy is limited and the degree of industrial development is not high. Such counties do not have the advantages of location and resources, and do not have the ability to replicate the development experience of first-tier cities, provincial capitals and the "top 100 counties" in the east.
The second is to appropriately position the development goals of the county.
Counties located in underdeveloped areas in the central and western regions blindly attract investment, carry out industrial parks and large city construction, and the first input cannot bring corresponding output, resulting in a large waste of national public resources. The development goals of such counties should conform to the trend of population flow, the law of industrial distribution and the needs of social livelihood, and should not be divorced from reality, blindly greedy for perfection, and induce disorderly loan financing. The proportion of GDP should be weakened in the assessment of county-level governance, and the proportion of comprehensive indicators such as ecological protection and public services should be expanded.
Third, it is necessary to properly handle the relationship between politics and administration.
One of the main reasons for the structural gap in county finances is unrealistic political goals. Therefore, the county should avoid the pan-politicization of governance affairs. The higher authorities should only be responsible for grasping the general direction, restraining the political impulse to make refined arrangements for the administrative process and administrative indicators, and appropriately retaining the operational space of the subjectivity of the county and township. Only in this way can we realize the marketization of investment and financing and solve the increase in the financial gap at the county level from the root.