In a recent development in Yi’an County, Heilongjiang Province, two reservoirs’ accumulated sludge were unexpectedly auctioned off for over 800 million yuan. The winning bidder turned out to be a state-owned enterprise that was established just 13 days before the auction, with a registered capital of only 270 million yuan, leading industry insiders to believe that behind this transaction lies another capital game where the public foots the bill.
According to information from the Heilongjiang Province Public Resource Trading Center, an auction was held on October 23 in Yi’an County for the disposal rights of 20 years worth of sludge from the upstream and Jumping Water reservoirs. The auction result revealed a winning bid of a staggering 839 million yuan, equivalent to about 76 yuan per cubic meter of sludge.
The Natural Resources Bureau of Yi’an County stated in an announcement that this move is to “explore the path of resource assetization to support the development of green economy.” Local media even described it as an “ecological innovation turning mud into gold.”
However, on platforms like Weibo and Zhihu in China, netizens have raised doubts, questioning how a pile of mud could worth over eight billion yuan.
Some netizens pointed out, “The local government auctions off the sludge, then a newly registered state-owned enterprise comes to buy the sludge, uses the sludge as collateral to take out a loan, uses the loan to pay the government for the sludge, and then the newly registered company goes bankrupt. The local government’s debt becomes the company’s debt, legally proceeding with bankruptcy, handing the sludge over to the bank.”
“In the end, the bank’s bad debts, or the central bank printing money to replenish reserves, leading to currency inflation, and the devaluation of ordinary people’s money. Ultimately, it’s taking the public’s money to let a group of powerful and well-connected individuals consume it.”
Chinese blogger “Cry in the Drizzle” pointed out that the real purpose of the winning bidder is not to “sell fertilizer” but to “finance.” Who is footing the bill? On the surface, no one seems to be harmed, but in reality, it is the public who bears the burden. This is a game where local governments use the “Three Capitalizations and Three Transfer” model to extract bank funds. Today’s revelry will eventually be paid by taxpayers, the environment, and society.
Data from Tianyancha shows that the winning enterprise, Qiqihar Zeyuan Environmental Protection Industry Co., Ltd., was registered on October 10, 2025, with a registered capital of 270 million yuan as a wholly state-owned enterprise. The company was established just 13 days before winning the bid.
There is no available information indicating that this company has actually paid the 270 million registered capital.
The shareholders of the company belong to a state-owned platform in Qiqihar City, with no experience in environmental treatment or reservoir management as their main business.
Some commentators suggest that this company appears more like a “financing shell company” specially set up for this auction.
The Chinese Communist Party is currently promoting the reform of state-owned enterprises through “resource capitalization, asset securitization, and capital leverage,” known as the “Three Capitalizations” reform, aiming to convert all state-owned resources into assets as much as possible, all state-owned assets into securities as much as possible, and all state-owned funds into leverage as much as possible.
Media reports indicate that Hubei, Anhui, and Jilin provinces are intensively advancing the reform of state-owned enterprises in terms of “Three Capitalizations” (resources, assets, funds), still in the stage of research, assessment, and issuing documents.
Under the pseudonym “Black Penguin,” an article on Zhihu titled “This time, the Northeast is finally leading the country” points out that the Yi’an Reservoir incident in Heilongjiang, where sludge was auctioned for a sky-high price, quietly showcases a benchmark case to the whole country.
Those state-owned resources that used to lie dormant in balance sheets, even seen as “burdens,” such as reservoir sludge, forests, data, through a process of “value assessment” and “technological empowerment,” are transformed into high-quality assets that can be evaluated, traded, and mortgaged.
Subsequently, state-owned enterprises bid high prices. Asset prices are solidified, and they then use this “fairly valued” asset package to seek bank financing.
In this perfect cycle, local governments revitalize resources, increase fiscal revenues, state-owned enterprises gain assets and projects, while also able to obtain low-interest loans, and banks meet their green finance KPI.
The “Three Capitalizations and Three Transfer” has become a new revenue channel for the local governments of the Chinese Communist Party.
The Yi’an Water Reservoir incident in Heilongjiang is not an isolated case. In 2023, the disposal rights of 1.45 million cubic meters of sludge from the Dongfanghong Reservoir in Tieling City, Heilongjiang, were auctioned for 61.03 million yuan. The winning enterprise similarly obtained bank loans by mortgaging the “disposal rights.”
A year later, local media discovered that the project was nearly stalled, with unclear fund flow of the loan.
Industry insiders bluntly stated, “These types of projects often lack real returns, and are just about debt maneuvering. The local balance sheet may look good, but the substantive risks have not disappeared.”
Chinese self-media summed up that in the past few years, local governments have been strapped for cash, selling land, and future revenue rights (such as parking lots, scenic area operation rights) to “use today’s money to pay for future expenses.” Now, as land finances are no longer sustainable, with local debts soaring, authorities have to find new breakthroughs, and the “Three Capitalizations and Three Transfer” policy has become a new revenue channel for the local governments of the Chinese Communist Party.
When mud can be auctioned off for eight billion, the public’s question is no longer about the price but about questioning this system.