The debt crisis in the Chinese Communist Party’s (CCP) directly-controlled city of Tianjin has become severe, forcing the CCP to intervene to provide assistance. Currently, multiple CCP ministries have jointly issued a document stating their support for Tianjin in financial aspects. However, analysts believe that this action not only cannot solve the problem but may also provoke backlash from other provinces, cities, and political forces.
On August 6, CCP state media reported that the People’s Bank of China (the CCP’s central bank), the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and the Tianjin Municipal Government recently jointly released the “Opinions on Financial Support for Tianjin’s High-Quality Development.”
These “opinions” put forward 34 tasks and measures to support Tianjin’s development in the financial sector. This includes strengthening financial support for technological innovation, promoting the integration of finance and digital technology, improving the financial system, accelerating inclusive finance and pension finance development, optimizing cross-border financial services, promoting regional-specific financial development, and enhancing financial supervision to prevent and resolve risks.
Zhao Yulong, Director of the Tianjin Regulatory Bureau of the China Banking and Insurance Regulatory Commission, stated during a press conference that the document includes 48 support measures in the banking industry, insurance industry, and other non-banking sectors. For the first time, it encourages the exploration of establishing a joint credit mechanism in the Beijing-Tianjin-Hebei region to promote credit resource flow. This also supports inter-regional cooperation in the banking industry and promotes financial statistics data sharing in the Beijing-Tianjin-Hebei region.
According to the “Interbank Credit Management Trial Measures for Banking and Financial Institutions” released by regulatory agencies in 2018, joint credit refers to multiple banking and financial institutions providing debt financing to the same enterprise. By establishing information sharing mechanisms, this aims to improve the bank-enterprise cooperation model. For enterprises with financing balances in three or more financial institutions totaling over 50 billion yuan (approximately 7 billion US dollars), banks should establish joint credit mechanisms.
Political commentator Li Yanming, based in the United States, stated on August 8th to Epoch Times that the Tianjin Municipal Government is heavily indebted, rumored to have already gone bankrupt. The rare joint support from various CCP financial-related ministries further confirms the severity of Tianjin’s debt crisis.
Li Yanming pointed out that the official term “inter-regional cooperation,” by encouraging “national banking institutions to explore the establishment of a joint credit mechanism in the Beijing-Tianjin-Hebei region,” indicates that Tianjin’s debt crisis cannot be solved solely by the Beijing-Tianjin-Hebei region and indirectly requests support from the entire nation. In fact, almost all local governments are deeply mired in financial and debt crises, with Tianjin’s issue being just the tip of the iceberg.
Li Yanming believes that Tianjin, as a directly-controlled city, receives policy bias and financial support from authorities with sensitive political factors at play. However, these politically privileged actions cannot fundamentally solve Tianjin’s problems and may instead provoke backlash from other provinces, cities, and different political forces, exacerbating the CCP’s financial crisis and political turmoil.
In recent years, Tianjin’s economic situation has continued to deteriorate with financial exhaustion and mounting government debt. Reports of its alleged bankruptcy have circulated.
Tianjin’s decline began around 2016 to 2017. A key event was the massive explosion of chemicals in the Binhai New Area of Tianjin in August 2015, equivalent to 21 tons of TNT explosive power. This incident caused direct economic losses estimated in the billions, with indirect losses difficult to quantify.
Former Tianjin Party Secretary Li Hongzhong heavily borrowed to boost his political achievements. During his six-year tenure in Tianjin from 2016 to 2022, debt surged. The Tianjin Municipal Government’s debt balance was 122.78 billion yuan (17.1 billion US dollars) at the end of 2016, escalating to 864.56 billion yuan (120.4 billion US dollars) by the end of 2022, a seven-fold increase.
However, Li Hongzhong has since been promoted to Vice Chairman of the National People’s Congress Standing Committee after the CCP’s 20th Congress. Therefore, despite Tianjin’s massive debt, no one currently faces accountability.
As one of China’s four directly-controlled cities, Tianjin possesses strategic resources like the Beijing-Tianjin-Hebei coordinated development, the Binhai New Area, and the Free Trade Port but still struggles to enter the top ten GDP ranking in China.
Tianjin’s Statistics Bureau reported on July 24 that the city’s GDP reached 819.1 billion yuan (approximately 114 billion US dollars) in the first half of the year, ranking 12th among all cities in China, dropping one place from the previous year. Over the past decade, Tianjin’s GDP ranking has continuously declined, surpassed successively by Wuhan, Chengdu, Hangzhou, and Nanjing, and now trailing after Ningbo.
In December of last year, the State Council of the CCP issued a notice to severely indebted local governments, instructing them not to initiate new government investment projects. For projects with completion rates exceeding 50%, investment scales were to be reduced, while those below 50% were to be suspended or delayed. Twelve “key provinces” were highlighted in the notification, with Tianjin being at the forefront. Beijing is concerned that massive local debt and poor economic growth prospects could lead to debt defaults.
In February of last year, former Chinese media figure Zhao Lanjian revealed alarming news on a social media platform X, alleging that Tianjin’s government had already gone bankrupt, with debts reaching 500%.
A screenshot shared by Zhao Lanjian showed that upon taking office as Tianjin Party Secretary, Chen Min’er declared at the first meeting that Tianjin’s debt ratio was 500%, the city was bankrupt, and the first target of cuts would be civil servant salaries. Chen Min’er, who assumed office in December 2022, implemented three measures: halting the provision of supplementary public funds unique to Tianjin for civil servants, significantly reducing civil servant bonuses and benefits, and streamlining the civil servant workforce to reduce financial expenditures.
In September of last year, Zhao Lanjian further disclosed on social media platform X that the Tianjin Hebei District government had run out of money to pay salaries in March and April of the previous year. They borrowed several billion yuan from a local prominent Buddhist temple, Dabeiyuan, to sustain operations until July when they faced another liquidity crisis and were denied further loans by Dabeiyuan.
Documents disclosed on the China Bond Information Network by the Tianjin Municipal Government as of the end of 2023 revealed that Tianjin’s government debt stood at 1.117 trillion yuan (approximately 154.8 billion US dollars), marking an almost 30% increase from the end of 2022. This figure excludes hidden debts.
The size of municipal bonds is generally used to estimate hidden debts. Official media reported in August last year that the ratio of newly issued municipal bonds in Tianjin used for refinancing had reached 100%. The balance of interest-bearing debts issued by Tianjin Municipal Investment and Development Group by the end of 2022 was 1.718 trillion yuan (approximately 239.3 billion US dollars). Therefore, it is estimated that Tianjin’s municipal bonds alone should at least remain at this scale.
Therefore, the combined government debt and municipal bonds in Tianjin amount to at least approximately 2.8297 trillion yuan (about 394 billion US dollars).
In comparison, Tianjin’s fiscal revenue last year was only 261.7 billion yuan (approximately 36.4 billion US dollars). This included 202.73 billion yuan (approximately 28.2 billion US dollars) in general public budget revenue and 58.96 billion yuan (approximately 8.2 billion US dollars) in government fund revenue.
Furthermore, Tianjin’s GDP last year stood at 1.6737 trillion yuan (approximately 233.1 billion US dollars).