Local governments in some Chinese cities owe property developers 1 billion yuan ($137 million) to 2 billion yuan each in unpaid bills, according to a local media report, with pressure building on the authorities to pay their debt.
(Bloomberg) — Local governments in some Chinese cities owe property developers 1 billion yuan ($137 million) to 2 billion yuan each in unpaid bills, according to a local media report, with pressure building on the authorities to pay their debt.
The outstanding amounts owed to the property firms include tax rebates and promised reimbursement of land sale fees, Economic Observer reported late Monday, citing unidentified executives at developers.
Various districts and counties in cities including Zhengzhou in the central province of Henan recently asked private real estate firms to submit details of the debt owed to them by the government, according to the report.
That came after developers urged local authorities in the past year to repay them to ease their liquidity crunch and ensure housing projects are completed, the report said.
Beijing is pushing local governments to settle their bills as part of efforts to boost dwindling confidence in the private sector. The issue was highlighted last month in a high-level statement outlining 31 measures to improve conditions for businesses. The nation’s top economic planning agency pledged earlier this month to punish local government departments that fail to make due payments to companies or hurt private firms unfairly in other ways.
The Economic Observer said company representatives spoke out on the issue during recent roundtable conferences with authorities, including the housing ministry, the central bank and some governments in megacities.
The slump in the property market has persisted for over two years without signs of bottoming out, and concerns are mounting that the housing crisis is spreading to state-owned firms and the financial sector.
Local government finances are under pressure after revenue from land sales, a major source of income, plunged. That’s limited their ability to spend and boost economic growth. Data on Monday showed China’s broadest measure of the fiscal deficit — the so-called augmented shortfall — shrank by more than a third so far this year compared with the same period in 2022.
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