How China’s communists fell in love with privatisation

livemint.com:

Subscribe to enjoy similar stories. On a recent visit to his hometown of Laixi, in eastern China, Guo Ping received a shock: the local government had sold off a number of state-owned assets, including two reservoirs. The small city’s finances, as well as those in the neighbouring port of Qingdao, were under strain, forcing officials to come up with new sources of revenue.

This meant hawking even large bits of regional infrastructure. The sales seemed to be part of what Mr Guo, who asked to use a pseudonym, views as a gradual economic deterioration. Cities and towns across China are struggling to pay their bills.

As policymakers labour to revive the country’s economy, tax revenues continue to fall. A property crisis makes matters worse, hurting the ability of local authorities to sell land-use rights to property developers, traditionally one of their main sources of income. Land-related revenues fell to 26% of total local-authority revenues last year, down from 36% in 2020.

As such, cadres have had to come up with new ways to raise money—no matter how awkward. Bus operators in small cities are having to suspend services. Low-level civil servants gripe about salaries being delayed or slashed.

Tax collectors have been looking back decades for unpaid bills. And cities are raising fines for infractions such as traffic violations. In Wuzhou, southern China, these now provide almost 50% as much income as taxes, compared with less than 8% in most cities.

After waiving tolls on highways for over a decade, provinces such as Anhui, Gansu and Shandong have started to collect them again. So why not sell some assets? Local financial analysts insist that cities are sitting upon incredible wealth. They control the sale of land and are