Recently, local governments are facing financial difficulties due to the impact of the epidemic control policies and the continuous economic downturn in China. One screenshot of Shanghai borrowing money from temples has been circulating online.
On July 2nd, a screenshot sourced from Netease News was posted on social media, showing an article titled “The financial tension of local governments may be far beyond your imagination, we really have no money.”
According to the article in the screenshot, an unnamed staff member from the Shanghai Municipal Finance Bureau revealed that in order to balance the financial statements for the first half of the year, Shanghai borrowed 10 billion RMB in incense money from temples such as Jing’an Temple, Longhua Temple, Jade Buddha Temple, Donglin Temple, Baohua Temple, Biyun Convent, Panlong An, and Hongfu Temple in the Shanghai area. Among them, Jing’an Temple contributed the most with 4.8 billion RMB.
In response to the above news, the Shanghai authorities urgently debunked the rumors, stating that the rumors are “untrue.” The Director of the Budget Department of the Shanghai Municipal Finance Bureau mentioned that the financial operation of Shanghai in the first half of the year is “overall healthy.”
On the evening of July 2nd, Netease also issued a statement debunking the rumors, stating that there is no relevant information on Shanghai’s finances in the circulated screenshot.
However, online searches found an article with the same title on the Netease platform on May 29, 2024, but it was later deleted.
Searching for the title “The financial tension of local governments may be far beyond your imagination, we really have no money,” led to a similar article found in a mainland Chinese forum.
The article mentioned data released by the Ministry of Finance showing a decrease in land sales revenue nationwide in the first quarter of 2024. It pointed out that the decline in land financial revenue from 2021 onwards has been noticeable, with a significant decrease each year.
What impact will the sharp decline in land financial revenue have? The article outlined three potential effects: affecting the financial situation of local governments including aspects such as education and public transportation, impacting official credit ratings, and potentially affecting the overall economic stability including potential increases in railway ticket prices and utility costs.
Currently, the actual financial data of Shanghai and whether the financial department has borrowed billions from local temples to balance financial statements remain unknown.
However, there are numerous online reports of Shanghai’s financial constraints, including stories such as “Local Communist Party lacks funds? Shanghai State-owned Assets Supervision and Administration Commission calls for party members to donate,” “Even China’s most charming city Shanghai is running out of money? Urgent halt to iconic project with total investment of 624 billion,” “Shanghai running out of money! Chinese people lament: small shops closing, squares empty, from small business owners to large enterprises all suffering,” “Shanghai residents fined for jaywalking: government running out of money.”
It is notable that in May last year, a document similar to a meeting summary was leaked in Kunming City, Yunnan Province. The document titled “Kunming City Investment Expert Meeting Summary” mentioned that in the next six months, Kunming would have 20 billion RMB debt maturity, and with the city investment company unable to pay, the city’s finances were insufficient. The provincial government also indicated they would not provide significant assistance. Several city investment company chairpersons had to travel to Shanghai to “ask for money.”
The document stressed that seeking help from Shanghai was not an “asset exchange” because Kunming had “no assets left.” It was a direct request for funds, as Yunnan is a designated area for Shanghai’s assistance, and previous central government subsidies to Yunnan, several billion RMB each year, were transferred from Shanghai.
The document specifically mentioned that last year’s transfers from Shanghai to Yunnan have not been received so far, mainly due to the impact of the epidemic.
In fact, after the start of the Sino-U.S. trade war in 2019, Chinese authorities repeatedly issued notices instructing all levels of government to “tighten their belts” and prepare for “living frugally,” calling it a “long-term policy.” Subsequently, the three-year epidemic lockdown policies imposed by the Chinese authorities had a significant impact on the economy, with the Shanghai municipal government strictly implementing the “zero-COVID” policy promoted by Beijing in 2022, consuming substantial resources. The crackdown on property developers by the Communist Party led to a nationwide real estate crisis, further impacting local governments’ reliance on land financial revenue for survival.