Local govs selling off the silverware
Chongqing is selling state assets to rein in municipal debt.
In a report published in June, the city’s economic planning agency said it was working to resolve its debt problems by “smashing our pots and pans to pieces and selling them as scrap” – an idiom that, in this case, refers to aggressively selling off assets (Caixin).
- That’s been echoed by Chongqing’s municipal districts, one of which mentioned the sale of operation rights of parking spaces and garbage disposal sites as part of efforts to “sell everything.”
Efforts are already paying off.
- In H1 2024, Chongqing’s non-tax revenue rose 31.2% y/y, driven by asset sales.
- Over the same period, tax revenue fell 2.8%.
Some context: Late last year, the central government explicitly instructed 12 heavily indebted provincial authorities – including Chongqing – to sell or lease out assets to keep local debt risks under control.
Chongqing isn’t alone in embracing this.
- According to Caixin, local authorities in Qinghai and Inner Mongolia have also reduced their debt by selling or leasing out state assets.
Get smart: Local governments own a huge amount of assets including land, mineral and forestry resources, and equity in firms.
- Selling those assets will help tackle local government debt problems – provided the proceeds are used to pay down debt and not simply to service interest payments.
Our take: More cities will likely sell off state assets in the coming months.
- The challenge will be finding willful buyers in a weak economy.