(Yicai Global) May 24 -- Kunming, the capital of China’s southern Yunnan province, today denied market rumors that its local government financing vehicles are having difficulty repaying debts. Official data also showed that the city’s fiscal revenue in the first four months of this year was much higher than a year ago.
Some online media have disseminated false information about Kunming’s city investment bonds recently, impacting local state-owned enterprises and related parties, the city’s state-owned assets manager said on its website. Legal action is being taken to protect Kunming’s reputation, it added.
A document about the minutes of a meeting of Kunming city investment bond experts has been circulating online. It suggested the city was cash-strapped and that many local SOEs were under pressure to repay debt, causing widespread concern in the market.
Ratings agencies have downgraded their outlook for many of the city’s LGFVs since the start of this year. For example, China Lianhe Credit Rating lowered its outlook for Kunming Dianchi Investment to “negative” from “stable” last month because the firm has been under short-term pressure to repay debt and has defaulted on commercial paper.
But official data revealed that Kunming’s fiscal revenue, or the money governments collect through taxes and fees, has risen this year thanks to a recovery in the local economy.
The city’s general public budget revenue totaled CNY20.7 billion (USD2.9 billion) in the first four months of 2023, up 9.1 percent from a year earlier, and government-managed funds’ budget revenue was CNY3.4 billion, a 1.3 percent gain, the data showed.
Last year, Kunming’s general public budget revenue sank 26.7 percent to CNY50.5 billion from 2021, reaching less than 71 percent of the budget level set early in 2022. The government-managed funds’ budget revenue fell 67.6 percent to CNY14.6 billion, mainly because income from transferring usage rights for state-owned land shrank amid the downturn in the real estate market, according to the city’s financial statements.
The city’s government debt balance was around CNY223.1 billion at the end of last year, ranking the highest in Yunnan province, but thanks to its large gross domestic product its debt-to-GDP ratio was only 29.8 percent, lower than the provincial average, Yuekai Securities said in a report.
But the report also added that there was a more worrying figure for the city’s broad debt-to-GDP ratio, taking the interest-bearing debts of LGFVs into consideration. The figure was 81.5 percent, the highest in Yunnan.
Editors: Dou Shicong, Tom Litting