Recently, incidents of local Chinese Communist Party (CCP) governments seizing private enterprises have been occurring more frequently. In Gansu Province, the chairman of Hongyuan Clean Heat Supply Co., Ltd. reflected that after signing a 30-year franchise operation agreement with the local government, the company invested a total of 370 million yuan and operated for 5 years before being forcibly taken over by the local government department. Similarly, Hengyuan Thermal Power Company in Boxing County, Shandong Province, invested 400 million yuan and operated for 15 years before facing the same fate.
According to a report by Chinese media “Elephant News” on October 30th, Chairman Zhang Yong of Hongyuan company recently told the media that he went to Gansu for investment through government investment promotion efforts and signed a franchise operation agreement for a 30-year heat supply project with the Minxian County government. Subsequently, the company invested 370 million yuan in total, constructing and upgrading over 40 kilometers of pipe network covering the entire city area, as well as renovating more than 20 heat exchange stations, ensuring the heating needs of Minxian County’s urban area. However, after operating for only 5 years, the company was forcibly taken over by the government regulatory department.
In the first half of 2020, Hongyuan company learned that government special bonds could be used for heating projects, with low interest rates and long repayment cycles. However, county leaders informed Zhang Yong that private enterprises were not allowed to use these special bonds.
Surprisingly, Zhang Yong discovered that Min County had applied for heating special bonds, raising 130 million yuan to build 1 boiler by the Min County Housing and Construction Bureau, and 2 boilers and related facilities by the county-owned City Investment Company in the same year.
Zhang Yong said, the operation of urban centralized heating formed a situation where the Housing and Construction Bureau, the City Investment Company, and Hongyuan company had a three-legged stance, with the “legal status of having the exclusive operation right” promised to our company by the Housing and Construction Bureau becoming a mere formality.
During this period, due to the soaring coal prices and the impact of the epidemic, in order to ensure urban heating, Hongyuan company incurred losses of up to 165 million yuan. “Heating prices are set by the government, but coal prices are affected by market fluctuations. When we took over in 2018, the local coal price was only 580 yuan per ton, but it continued to rise, reaching 1900 yuan per ton by 2020,” Zhang Yong said. “We have more than 30,000 users, and over 10,000 households are unable to pay their bills each year.”
“Among these over-10,000 households in arrears, nearly 1,000 households have personal relationships. Some leaders ask our chairman and general manager not to collect heating fees as a ‘favor’. There is even a court staff member who openly said ‘I haven’t paid my heating bill for years’,” revealed Cao, director of the Hongyuan company office. “If we don’t waive the fees, our work may be hindered.”
In 2023, with coal prices falling, Hongyuan company entered a stage of benign development. However, without any verbal or written notice from the supervisory department, on June 13 of that year, Zhang Yong received a lawyer’s letter canceling his company’s franchise operation rights.
On July 7 of the same year, the Min County Housing and Construction Bureau issued a “Notice on Taking Over the Urban Centralized Heating in Min County”, and around 9:00 on July 12, the Urban Central Heating Task Force entered Hongyuan company, took over the company, and sealed off the company’s assets.
On July 27, the county government issued a public notice approving the cancellation of the “Franchise Operation Agreement for Urban Centralized Heating in Min County” signed with Min County Hongyuan Clean Heat Supply Co., Ltd., and revoked its franchise operation rights, transferring them to a company under the City Investment Company for operation.
Over the past two years, Zhang Yong has been travelling around, hoping to reclaim the company. “I have sent two lawyer’s letters to the county government, the County People’s Congress, and the CPPCC, with no response. I went to the petition hall of the Gansu Provincial Government, and was told it had been transferred to the petition bureau of Dingxi City for processing. The Dingxi City petition bureau then transferred it to the Min County petition bureau, and the Min County petition bureau transferred it to the Min County Housing and Construction Bureau. We are ordinary people, and our arms will always be weaker than the thighs.”
On the same day, “Elephant News” also reported a heating private enterprise in Shandong Boxing County being seized after refusing to guarantee loans totaling 400 million yuan.
“We were invited to invest in Boxing County by the local government.” said He Shaojiang, a shareholder of Hengyuan Thermal Power Company in Boxin County. In June 2010, Shandong Tongyuan Heat Group signed a 30-year “Boxing County Urban Centralized Heating Agreement” with the Boxing County government, setting up Hengyuan Thermal Power Co., Ltd. and Tongyuan Heat Co., Ltd. in Boxing County, providing winter heating services for urban residents.
He Shaojiang stated that over the past 15 years, the companies invested nearly 400 million yuan, constructed over 180 kilometers of heating pipe network, over 200 heat exchange stations, providing heating services to nearly 50,000 households. The company’s qualifications and licenses are complete, heating pipe network equipment facilities are in their “prime years”, without any major safety accidents, and have received recognitions from the Boxing County Housing and Construction Bureau for providing safe heating.
“In May 2023, Liu Xuegang, Director of the Boxing County Housing and Construction Bureau, came to our company. At first, he said that the government was preparing to issue special bonds for financing; because there are regulations at the national level, reporting units need to hold valid heating operation permits, so they wanted to use our company’s name to apply for the bonds,” said He Shaojiang. The company, considering the existence of certain risks, did not agree.
“A few days later, Liu Xuegang proposed that the government Public Utilities Group invest in our company,” said He Shaojiang. The company, not lacking in funds and technology, had no need to bring in shareholders, combined with the previous matter, the company was afraid of the other party using shares as collateral, so they refused.
“On May 10, Liu Xuegang came to the company again, but this time, his statement changed, saying the government Public Utilities Group was preparing to acquire our company. We believed that the company’s current operations were good, and with massive initial investments yet to be recovered, we did not agree.”
Over the next two years, both Hengyuan and Tongyuan companies found that the attitude of the relevant departments of Boxing County had changed, eventually being targeted by the government departments in the replacement of the heat source.
He Shaojiang said, the old heat source – Shenghe Power Plant was about to be shut down, while the new heat source – National Energy Boxing Power Plant had been completed and put into operation. “We have repeatedly applied to the government supervisory department for coordination of the new heat source but have not received any response.” According to the “Boxing County Urban Centralized Heating Agreement,” the county government is responsible for coordinating the power plant heat source.
After numerous urging from the company, on May 10, 2025, the Boxing County Housing and Construction Bureau held a coordination meeting. “Only the Housing and Construction Bureau, the county finance group, and our company attended, while the National Energy Boxing Power Plant did not participate,” said He Shaojiang. In the absence of the county’s pricing authority, the Housing and Construction Bureau proposed a heat source price of 92 yuan per gigajoule, of which 45 yuan is the heat source fee, and 47 yuan is the transmission fee.
“In one heating season, Boxing County uses roughly 2.5 million gigajoules, totaling over 270 million yuan, but the company only collects just over 100 million in heating fees. How do we manage?” He Shaojiang stated that in Shandong, the highest factory price of heat sources is only around 40 yuan per gigajoule, with transmission fees generally around 10 yuan, “the new price nearly doubled, treating companies as cash cows to be slaughtered.”
On May 20, the Boxing County Housing and Construction Bureau issued a “Notice,” stating that if Hengyuan and Tongyuan companies did not reach an agreement with the heat source enterprise by June 25, the “Franchise Operation Agreement” would be terminated, the franchise operation rights revoked, and temporary takeover implemented.
On September 28, the Boxing County Housing and Construction Bureau issued a “Decision on Recission of (Franchise Operation Agreement) and Cancelation of Franchise Operation Rights” to both companies. On the same day, a “Notice on the Temporary Takeover of the Urban Central Heating Project in Boxing County” was also issued.
“On September 29, the Boxing County Public Security Bureau, special police personnel and vehicles were deployed, parked outside the company’s office area, and accompanied by the Boxing County Public Utilities Group’s Boxing Hengtong Heat Co., Ltd., under the guise of ‘law enforcement’, they sealed and confiscated our heating property equipment, and posted a ‘Personnel Handover Notice’ on the company’s gate,” said He Shaojiang.
On October 3, topics such as “Gansu’s 370 million heating private enterprise forcibly taken over,” “Heating private enterprises claim over 1,000 households unable to pay due to favors,” and “Gansu and Shandong’s heating private enterprises with assets worth hundreds of millions forcibly occupied” caught the attention of netizens.
Netizens remarked, “It’s not that they’re forcibly taken over and dare not speak, now that the face has been torn apart, everything has been exposed.” “It’s tough for private enterprises.” “So blatant.” “There’s no business environment left in that place.” “This is just the tip of the iceberg, many companies on the market are facing this problem, being threatened and extorted.”
“An investment of 400 million yuan from a heating company recognized and later forcibly taken over by the government after refusing to guarantee loans, the ‘ugly truth is too blatant’.” “Private enterprises have become fat prey.” “This is how state-owned enterprises grow?”
“Don’t know if everyone remembers the last time a company in Maotai Town was taken over, we haven’t seen the investigation results yet, and now this incident has come out.” “Seeing this event, I suddenly remembered the incident where the Baijiu wastewater treatment plant in Guizhou was forcibly taken over, it’s been so long, and it seems like there’s been no resolution.”