Chinese City of Wuhan Bears Extraordinary Level of Debt
The capital of central China’s Hubei Province, the industrial city of Wuhan, which is known to the outside world for having construction all over the city, is now suffering financial difficulties.
On Sept. 15, several residents of Vanke Golden City in Baisha Zhou area of Wuhan complained to the Weibo account of a reporter for the China Business Journal (CBJ) about the failure to complete roads.
The residents said that in accordance with the plan, several roads including Baisha route number 4 and 5 were due to be operational by 2009. Four years later there has been no further progress, and the Hongshan District government of Wuhan says that due to urban construction funding constraints, there is no construction plan for 2013 at present.
This funding difficulty encountered by the road construction project in Baisha Zhou is not an isolated case. The CBJ reporter learned that in this city known for construction everywhere, while the number of construction sites keeps increasing, so does the local government debt.
Based on the latest statistics released by the Wuhan Urban and Rural Construction Commission, the number of construction sites in Wuhan has reached 11,012 in 2013. In this city of 3,280 square miles, the density of construction sites has reached 2.6 sites per square mile.
Meanwhile, the CBJ reporter obtained a copy of Investigation and Reflection on Local Government Debt Management of Wuhan City in Hubei Province from the Office of the Commissioner of the Ministry of Finance in Hubei. It indicates that by June 30, 2012, Wuhan’s debt amounted to 203.705 billion yuan (US$33.28 billion).
The report also shows that Wuhan City needs to repay 31.059 billion yuan (US$5.07 billion) of capital and interest in 2013, and this amount will increase to 31.176 billion yuan (US$5.09 billion) in 2014.
A political and economic observer in Hubei told CBJ that an inevitable consequence of cumulative debt will be for the local government to increase land sales to attract private investment in order to pay back the debt and support large-scale urban constructions.
On Sept.16, the Wuhan Urban and Rural Construction Commission held a meeting to attract private funds. An attendee disclosed that few private enterprises were willing to participate due to the large amount of investment involved in the infrastructure projects.
How many debt-ridden cities like Wuhan exist in China, that is the question.