According to the latest data, the phenomenon of overdue commercial bills by Urban Construction Investment Companies (UCICs) in multiple cities in China is still ongoing, indicating that UCICs are still facing tight financial situations. UCICs are financing platforms established by various mainland city governments, reflecting the financial constraints of local authorities.
In early July, the Shanghai Bill Exchange disclosed the “List of Drawees Overdue as of June 30, 2024”.
The list shows that as of June 30, 2024, there were 1397 drawees who had three or more instances of overdue bills and either had an overdue balance at the end of the month or had bill overdue behavior that month. According to statistics from the Fixed Income Research Team of Huatai Securities, in June 2023, 29 UCICs issued commercial bills which had overdue amounts totaling 780 million yuan, with 8 UCICs being revealed for the first time as overdue drawees and 9 UCICs having continuous bill overdue issues.
A report from Caixin on July 12th indicated that in June, many local UCICs with government financial bureaus or the State-owned Assets Supervision and Administration Commission as the actual controllers and who have issued bonds appeared on the list of commercial bills overdue: Mille Industrial Park Investment and Development Co., Ltd., Shandong Zhengfang Holdings Group Co., Ltd., Lunan (Zaozhuang) Economic Development Investment Co., Ltd., Tongxiang Chongde Investment Development Group Co., Ltd., Linqu Yishan Industry Co., Ltd., Qihe UCIC Construction Group Co., Ltd., Jiangsu Yinbao Holdings Group Co., Ltd., and Kaifeng City Operation Investment Group Co., Ltd. The amounts of overdue commercial bills for UCICs range from millions to tens of millions of yuan.
In addition to UCICs, some enterprises under the umbrella of these UCICs also appeared on the list of continuous overdue commercial bills. Caixin reported that Kunming Urban Construction Investment Development Co., Ltd. (with a cumulative overdue amount of over 271 million yuan) and Zunyi Daqiao Construction (Group) Co., Ltd. (with a cumulative overdue amount of over 319 million yuan) were among them.
Public information shows that Kunming Urban Construction has Kunming State-owned Assets Supervision and Administration Commission as its major shareholder and actual controller, currently with six bonds outstanding; while Zunyi Daqiao is the largest UCIC platform in Zunyi City.
According to the “2023 UCIC Commercial Bill Overdue Panoramic Analysis” by China Chengxin International, there were a total of 79 UCICs with overdue commercial bills in 2023, mainly at the district and county levels, with 28 companies still not completing redemption by the end of 2023, involving an amount exceeding 3.2 billion yuan. In terms of the number of drawees, Shandong, Guizhou, and Yunnan had 19, 12, and 10 UCIC companies respectively listed in the 2023 overdue list, ranking in the top three nationwide.
Caixin believes that the ongoing phenomenon of commercial bill overdue by UCICs in many places indicates that the financial chain of some UCICs is still under tight pressure.
Commercial Acceptance Bill (CAB) is a bill of exchange issued and accepted by the payer, generally provided by core enterprises to serve as payment vouchers for small and medium-sized enterprises, needing a genuine trading basis.
The financing model of commercial bills was originally created by real estate companies in urgent need of capital several years ago, followed by many local UCICs using this financing model for funding purposes.