Hegang Municipal Government of Heilongjiang announced that it would implement fiscal restructuring due to debt issues. The local government would also postpone its civil service recruitment.
Hegang was the first prefecture-level city in China to carry out financial restructuring. As early as 2018, Yanjiang District and Anyue County in Ziyang City, Sichuan Province, also announced their fiscal restructuring plan for the first time due to debt problems. However, after the Hegang government’s official announcement, public opinion was so aggressive that they had to take it down on Dec. 25.
Shi Wenwen, a professor at the China University of Political Science and Law, told “China Business News” that Hegang’s restructuring showed the city’s contradictions in local finance revenue and spending. As the debt increased, the city had to reduce expenditure to cope with the situation.
Chinese regulations ruled out that a county or a city must conduct fiscal restructuring when its annual debt surpasses 10% of the public funds or its interest payment exceeds 10% of the state budget.
In 2019, Hegang’s finance bureau announced that the city entered a peak debt repayment period. At the time, the city’s debt principal and interest reached $.49 billion.
In a report issued by the city’s finance bureau in March, Hegang’s local government debt reached $2.06 billion, increasing 25% compared to last year.
Since the beginning of 2021, China’s economy has been slowing down. Finance income fell sharply in different areas. In August, Mainland financial column “Gelonghui” official statistics showed that only Shanghai had a budget surplus out of 31 China provinces and cities. Henan, Sichuan, and Yunnan suffered the most budget deficit, with a revenue and expenditure gap up to $39.23 billion.
At the annual Central Economic Work Conference held in early December, the CCP’s authorities stated that the party’s agencies and government must endure the hard days.
Since December, public servants have continuously received pay cut announcements, ranging from 20% to 30%. Qin Peng, a China’s political and economic commentator, said the pay cut indicated that the mainland economy was in a difficult situation.
A Zhejiang civil servant complained about her 25% pay cut on Weibo, which sparked concerns among social media users. A Weibo user stated that the Shanghai police director’s annual salary dropped from 54.92 thousand to 31.38 thousand. Cadres’ salaries in lower levels decreased from 37.66 thousand USD to 23.54 thousand.