China’s private firms demand tighter oversight of local governments as virus causes spike in late payments
- Private firms in China are calling for tighter monitoring of local governments that fail to pay contractors on time
- Tax cuts to support growth and higher spending to combat the coronavirus pandemic have weakened fiscal positions of regional authorities
China should establish a system to monitor the finances of cash-strapped local governments that fail to pay private businesses on time, fed up company executives say, a problem that is growing worse as the coronavirus ravages the economy.
Governments with low creditworthiness scores could be punished, and jurisdictions banned from starting new projects, according to the proposals.
Proposals to address the situation are expected to be debated at the annual “two sessions” – the meetings of China People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC) this week.
Those that are not creditworthy should not be allowed to launch projects
Liu Yonghao, chairman of the New Hope Group, one of China’s largest pig breeders, said a social credit scheme that tracked local government finances, including delayed payments and contract violations, could be used to determine creditworthiness.
“These indicators are important when it comes to evaluating local governments,” he said in a proposal to the NPC, often referred to as China’s parliament, of which he is a member. “Those that are not creditworthy should not be allowed to launch projects.”
In an online media briefing, Liu cited a survey of 7,000 businesses in Sichuan province in which most said overdue payments for goods and services provided to local governments was a major problem.