Caixin
ECONOMY

Local Governments Find New Ways to Play Debt Game

By Wang Xiaoxia and Fran Wang
Loopholes in procurement rules have allowed officials to hide borrowing made to fund investment projects. Above, a worker welds a steel frame on March 17 for a bridge under construction on the Songhua River in Harbin, Heilongjiang province. Photo: Visual China
Loopholes in procurement rules have allowed officials to hide borrowing made to fund investment projects. Above, a worker welds a steel frame on March 17 for a bridge under construction on the Songhua River in Harbin, Heilongjiang province. Photo: Visual China

In 2015, the district government of Tongzhou in the eastern city of Nantong, Jiangsu province, wanted to build a wharf. But instead of playing by the rules of the Budget Law and Government Procurement Law and putting the project in the budget, local officials went down a different path to make it easier to get the deal done.

They hid the investment by farming it out to one of the district’s local government financing vehicles (LGFVs), companies set up specifically to fund spending outside of the budget. To get around new rules preventing local governments from using LGFVs to pay for infrastructure construction, officials decided to cheat by classifying the spending as the procurement of services from a company.

You've accessed an article available only to subscribers
Try 4 weeks for $0.99
SUBSCRIBE
Share this article
Open WeChat and scan the QR code
Copyright ?2017 Caixin Global Limited. All Rights Reserved.