In recent days, a screenshot of a document from the Bishan District Government in Chongqing, China, establishing a “selling the pot and the iron” task force, has been widely circulated on social media. Analysts believe that local governments resorting to “selling the pot and the iron” signifies their financial hardship, forcing them to sell assets at lower prices to raise funds. However, amid the backdrop of China’s overall economic downturn, this debt resolution method may not yield desired results.
The leaked screenshot shows the Bishan District Office of Chongqing Municipality issuing a notice to establish the “selling the pot and the iron” task force. According to the notice, the task force is led by the Deputy District Chief in charge of executive affairs, with the Deputy Director of the District Finance Bureau and the Director of the District State Assets Center as deputy leaders. The task force office is located in the District Finance Bureau, overseeing the daily operations of the task force.
This incident sparked controversy mainly due to phrases like “disposal of assets and debt resolution support” and the establishment of the “selling the pot and iron” task force in the circulated screenshot, attracting public attention.
The term “selling the pot and the iron” originates from the mid-length novel “Puliu Renjia” by contemporary Chinese writer Liu Shaotang, meaning to exhaust all possessions to accomplish a task. In official Chinese documents, “selling the pot and the iron” refers to local governments revitalizing state-owned “three assets” (funds, assets, resources) through various means, lowering debt levels, and enhancing the quality and efficiency of fiscal expenditures.
The document from the Bishan District Government mentions that the task force is responsible for coordinating the “selling the pot and the iron” work across the district, including formulating work plans, defining implementation scope, determining asset bundles, establishing pricing mechanisms, improving incentive measures, promoting project implementation, conducting policy publicity, and handling other matters related to “selling the pot and the iron.”
An employee of the Bishan District Finance Bureau confirmed to Chinese media that the “selling the pot and the iron” task force has officially commenced operations.
An official from a district government in Chongqing told China’s Caixin Media that the term “selling the pot and the iron” signifies an attitude stance, aiming to promote asset activation and liquidation.
The mention of “selling the pot and iron” is not limited to the Bishan District of Chongqing. Since 2023 during debt resolution efforts, Chongqing City has utilized “selling the pot and the iron” as a means of asset disposal. In 2024, this phrase frequently appeared in work reports of various local governments within the Communist Party of China, budget reports, and public speeches by financial department officials.
The Inner Mongolia Autonomous Region stated in its 2024 government work report that it must “persist in selling the pot and iron to pay off debts.” The government work report of Wuhai City in Inner Mongolia for 2024 also mentioned resolving government debt risks through “selling the pot and the iron.”
The Director of the Gansu Provincial Finance Department, Lv Linbang, stated in an article in March this year that it is necessary to formulate measures to prevent and resolve government debt risks in accordance with the Communist Party of China’s debt reduction requirements, tighten belts, and raise funds through “selling the pot and iron.” The all-encompassing debt relief plan for Lanzhou City in Gansu Province includes measures to “sell the pot and iron” to raise funds.
Jiamusi City in Heilongjiang Province mentioned in its 2024 budget report that it needs to revitalize idle assets of administrative units and state-owned enterprises through “selling the pot and the iron.”
Liaoyuan City in Jilin Province proposed in its 2024 budget report to persist in “selling the pot and the iron” to pay off debts and “live frugally,” intensively raising funds to repay debts. The 2024 government work report of Siping City emphasized persisting in “selling the pot and iron to pay off debts” and “tightening belts to live frugally,” comprehensively activating idle resources and assets.
The budget report for Liupanshui City in Guizhou Province for 2024 proposed raising funds through “selling the pot and the iron.” Zhangjiajie City in Hunan Province claimed in its 2024 government work report to “firmly hold on to the determination of selling the pot and iron to prevent the increase of hidden debts.”
On August 31, during an interview with a reporter from Dajiyuan, Lu Yuanxing, who had served as a senior market executive in several Chinese companies, stated that when local Communist Party governments resort to “selling the pot and the iron,” it typically indicates they have reached a point of financial desperation, having depleted their resources and unable to realize assets at ideal prices, ultimately resulting in selling assets at lower values.
Lu Yuanxing mentioned that while the Communist Party government often mentions “activating assets,” concrete measures seldom materialize. He asserted, “Currently, the Chinese economy is experiencing a downturn, with overall economic contraction and the real estate market yet to hit rock bottom. Moreover, ‘selling the pot and the iron’ is not just a localized action. Against the background of a nationwide economic slump, it is challenging for various regions to sell assets through resource allocation. Therefore, the question of who will take over becomes a problem, as everyone is short of funds.”
In his opinion, local governments’ attempts to raise funds by selling or underselling equities, bonds, and land resources may not achieve the desired outcomes. He explained that in a situation of overall economic decline, the value of these assets continues decreasing, causing potential investors, as the capital side, to be very cautious about acquiring them, potentially leading themselves into difficulty.
“This is why even if the government injects funds or prints money, it doesn’t work,” Lu Yuanxing remarked. “Although funds are released, they do not flow into the real economy. People are reluctant to invest or lend money, resulting in financial stagnation. This reflects market sentiment, with widespread pessimism about the economic outlook. In this scenario, even if local governments sell assets, it’s difficult to realize the sale and cannot obtain good prices, resulting in outcomes that are less than satisfactory.”
Chinese studies scholar and Associate Professor at the University of Technology, Sydney, Feng Chongyi, also told a reporter from Dajiyuan that when local Communist Party governments include the term “selling the pot and the iron” in official documents, it signifies their inner dissatisfaction. He stated that when local government finances encounter issues, the central Communist Party does not offer assistance but demands local areas solve financial crises independently. Local governments may not genuinely implement specific measures but instead pass the responsibility onto others while sarcastically targeting the central authorities.
Feng Chongyi further noted that local governments previously relied on real estate to sustain financial operations. However, with the real estate sector now in distress, even civil servants’ salaries are at risk, and the gap in social security funds is widening continuously. The current situation has turned into empty sloganism and shifting blame. He remarked, “Selling the pot now to make ends meet tomorrow, what about the day after tomorrow? This indicates that local governments can no longer engage in long-term planning.”
On August 30, data released by the Chinese Ministry of Finance revealed that in July 2024, the Communist Party issued new bonds totaling 320 billion yuan (approximately 45.1 billion US dollars), with nationwide issuance of refinancing bonds amounting to 390.8 billion yuan (about 55.1 billion US dollars), summing up local government bond issuance nationwide to 710.8 billion yuan (around 100.2 billion US dollars).
In the first seven months of this year, local governments in China issued approximately 4.2 trillion yuan (roughly 592.1 billion US dollars) in local government bonds, with refinancing bond issuances reaching around 2 trillion yuan (approximately 282 billion US dollars), and 2.2 trillion yuan (about 310.1 billion US dollars) in new bond issuances.
Refinancing bonds by local governments are mainly used to repay principal on maturing government bonds or existing debts, known as “borrowing new to repay old.” Newly issued bond funds are primarily directed towards infrastructure projects and major constructions. Thus, out of the 4.2 trillion yuan in local government bonds issued, nearly half is allocated for “borrowing new to repay old” to alleviate debt pressures.
Official numbers from the Communist Party indicate that by June 2024, local government debt balance in China amounted to 42.6 trillion yuan (about 5.98 trillion US dollars). Yet, the prominent investment bank Goldman Sachs estimated in August 2023 that cumulative local government debt in China had already reached 94 trillion yuan (approximately 13 trillion US dollars), including debts from local government financing platforms, which are off-the-balance-sheet liabilities.
Local government financing platforms are referred to as the “black hole” of China’s financial system by industry insiders. A report from the China Banking Research Institute previously highlighted that the debt of the main bodies of local financing platforms, referred to as urban investment platforms, amounts to tens of trillions of yuan, posing a systemic threat to financial stability in China.
To address local debt issues, in July 2023, the meeting of the Central Political Bureau of the Communist Party of China first proposed to “effectively prevent and resolve local debt risks and formulate and implement an all-encompassing debt reduction plan.” Subsequently, in September 2023, special refinancing bonds began issuance in China.
At the end of 2023, the General Office of the State Council of China issued the “Management Measures for Strengthening Government Investment Projects in Key Provinces (Trial),” widely discussed in the market as the “Document No. 47.” This document identified twelve key provinces including Tianjin, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Guangxi, Chongqing, Guizhou, Yunnan, Gansu, Qinghai, and Ningxia, instructing these regions to vigorously resolve local debt risks through “selling the pot and the iron” and strictly control new government investment projects.