The largest city in central China, Wuhan, has publicly demanded that hundreds of local companies pay their debts. This is an extremely rare move that put the city in the dire financial situation. The city’s finance bureau said in a statement published by the official Changjiang Daily newspaper that 259 companies and entities owned more than 100 million yuan combined. It urged them to pay their overdue debts soon. The finance bureau argued that it was not successful in collecting the debts. They even offer rewards to anyone able to provide useful information regarding to the debtors’ financial assets.
Wuhan was the epicenter of the Covid-19 pandemic in the late 2019. The city undergoes unusual financial challenges facing China’s local governments. Apparently, Chinese’s leader Xi Jinping’s zero-covid campaign has drained the budgets of many cities and provinces. They have spent billions of dollars on frequent Covid lockdowns, mass testings, and quarantine centers. A real estate crash has ecacerbated the problem due to the local government relying on land sale revenues. Analysts predict that China’s outstanding government debts has passed 123 trillion yuan. It is nearly $10 trillion hidden debt under the risky local government financing platforms.
Because of the tightening budgets, some cities have already slashed medical benefits for senior. It lead to protests. Then, other vital services are also at risk. Apparently, Wuhan’s debt collection announcement cae just days after the official financing arms of Kunming, the capital of Yunnan province. They struggled to raise enough money to pay what they owned their bondholders.
