More than 20 private enterprises in Shuyang County, Suqian City, Jiangsu Province, have been “trapped” by the local government and “loaned” more than 3 billion RMB in the form of “loans to the government”, leaving them unable to pay back the money and on the verge of bankruptcy.
(Sanshan), the only construction company in Shuyang County, Jiangsu Province, with first-class qualifications, was in the doldrums at the end of 2020, China Newsweek reported on January 7.
Zhao Jincheng, the head of Sanshan Company, said that Sanshan Company was in debt of more than 62 million yuan and that interest and penalties were increasing every day.
In 2012, Sanshan was selected by the Shuyang County Finance Bureau to be involved in a “loaned” financing incident involving 20 million yuan.
Zhao Jincheng said Sanshan thought it was helping the government finance the project as requested by the county finance bureau and did not use any of the money. Unexpectedly, in 2014, three good company was the county finance bureau of the guarantee company sued, demanding repayment of the loan.
Zhao Jincheng said, feel that the company encountered the government set of loans, the original normal operation of the company is now broken capital chain, on the verge of bankruptcy.
Sanshan, a private enterprise founded in 2004, used to have 217 core employees during normal operations, with a total workforce of more than 3,000 at its peak.
Shuyang County, Jiangsu Province, has a population of nearly 2 million, making it the most populous county in Jiangsu Province.
In order to show its “performance” to the CPC Central Committee, Shuyang County started to implement the “private borrowing for government use” financing model in 2009, with the Shuyang County Finance Bureau identifying private enterprises closely linked to the county’s finances as financing platforms and providing The Shuyang County Finance Bureau began to identify private enterprises with close financial ties to the county as financing platforms and provided guarantees or pledges of certificates of deposit to obtain loans from banks under the guise of these enterprises. During the process, the county finance bureau issued a written “commitment letter” to the enterprise, stating that “the loan has nothing to do with your company” and guaranteeing that the finance bureau would bear the principal and interest. After the private enterprise receives the loan, it is quickly transferred to the account of the Finance Bureau. Under this model, the private enterprise only acted as a financing tool for the Finance Bureau, not the actual user of the loan.
Under this model, more than 20 enterprises in Mu Yang County have co-financed about 3 billion RMB in 3 years.
However, the financing model of “people borrowing from the government” has had its share of surprises in practice.
In January 2011, the Shuyang County Finance Bureau borrowed 18 million RMB from the Shuyang County Industrial and Commercial Bank (ICBC) as a financing platform, using a pledge of extra-budgetary funds certificates of deposit. However, instead of crediting the finance bureau’s account as agreed, the company “kept the 18 million yuan for itself,” leaving a gap in local finances, and the Shuyang Finance Bureau had to find an “underling” to fill the gap. As a result, Shuyang Finance Bureau had to look for an “underling” to fill the shortfall, and Sanshan became the receiver of the local government’s “government borrowing” financing model.
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