(Yicai Global) May 30 -- Wuhan, a major city in central China, has published a debtors blacklist in a local newspaper, as the Ministry of Finance calls for all local governments to clear debts formed before 2018 by the end of the year.

The names of 259 companies that owe money to the Wuhan government were listed in a local newspaper on May 26, pressing them for payment. A number of local governments are increasing their efforts to recoup funds as the deadline approaches.

The debts consist of pre-allocated funds, loans and other receivables, the source in charge of clearing debts at a local government said to Yicai Global. A large amount of debts accumulated in recent years due to weak budgetary constraints and this creates hidden risks in local governments’ fiscal operations.

The central government has enhanced regulation on finance and accounting this year, including standardizing treasury management and clearing debts, so more places in the country will finish collecting debts this year, an expert told Yicai Global.

This has something to do with local governments’ financial squeeze, another source said.

The Ministry of Finance issued a document in 2018 requiring all local governments to contain local debt. Jiangsu, Henan, Jiangxi, Liaoning, and Hebei provinces all subsequently said they will take action.

Some provinces have made good progress in gathering monies owed. For example, the finance department of eastern Jiangxi province said all 22 counties have collected their debts. The finance department of the Xinjiang Uygur Autonomous Region had recovered CNY4.5 billion (USD634.4 million) in debts as of May last year, it said.

Hunan province has contained the rise of debt and met the goal set by the Ministry of Finance two years ahead of schedule, the finance department of the central province said.

Some long-standing loans are difficult to recover and are actually bad debts, the person said. Writing off such loans is the only option if they cannot be recovered after all possible efforts have been made. For instance, some of the companies have gone out of business.

Clearing debts is an important move to guard against risks in fiscal operations and will help standardize budget management, improve the use of financial funds and hike returns, the expert said.

Editors: Shi Yi, Kim Taylor