Day: April 4, 2024

Authorities across China are shutting down local asset trading centers in an ongoing bid by the ruling Communist Party to tighten its grip on financial transactions of all kinds amid a mounting local government debt crisis in the wake of a burst property bubble.

The closure of local asset exchanges offers a glimpse into the murky world of local government revenues, which has relied on buoyant real estate prices, “donations” and “gifts” from state-owned enterprises and governments higher up the chain of command, as well as a network of personal favors and relationships among powerful local officials to stay solvent since late supreme leader Deng Xiaoping kicked off economic reforms in 1978.

Governments in Hunan and Liaoning provinces and Xian and Chongqing cities last week canceled business licenses issued to the exchanges, citing a need for financial risk management, the Securities Times online edition reported on March 26.

Under China’s current tax sharing system, local authorities get slightly more than half of the national revenue from taxes and fees but undertake around 85% of public spending on things such as social security and education, Bloomberg quoted financial experts as saying in January.

The result has been a system where local governments have been given huge latitude to raise funds wherever possible, making it hard for regulators in Beijing to have a full picture of financial risk across the whole country.

Many of the asset exchanges being targeted are state-owned, and have been used for the trading of local financial assets including private debt issued by local governments, and more shutdowns are likely on the way, the Securities Times report said.

“They’ve increasingly been found to be trading in banned financial products in recent years,” financial commentator Zheng Xuguang told Radio Free Asia in a recent interview. “The majority of their business is in breach of regulations.”

“[The authorities] see them as causing a lot of problems, including financial risk.”

‘Implicit debt risk’

The problem is that many of the exchanges are state-owned and endorsed by local governments, Zheng said.

“They’re completely revoking all of the privileges of these state-backed asset exchanges, which means that the government won’t recognize any of their derivative products,” he said.

“They’re trying to purge local financing platforms of anything that might cause financial shocks.”

The exchanges have also been used to trade in local government private debt, Reuters reported.

Financial regulators in China’s provinces of Hunan and Liaoning and cities of Xian and Chongqing said in statements posted on their websites about the shutdowns that the moves were part of a bid to “resolve financial risks.”

“The public, especially investors, are requested to pay attention to identifying and preventing relevant risks, choose legal investment channels, and resolutely resist all types of illegal financial activities,” an announcement from the Hunan Provincial Financial Administration Bureau on March 25 warned.

At the end of 2023, outstanding local government debt totaled 40.74 trillion yuan, including about 15.87 trillion yuan of general debt and 24.87 trillion yuan of special debt, state news agency Xinhua reported on March 11.

Last June, the National People’s Congress Financial and Economic Affairs Committee highlighted significant debt risks in certain cities and counties, noting the ongoing emergence of new “implicit debt.”

“The recent years have seen increased pressure on local fiscal operations due to the pandemic, real estate market adjustments, and other factors, leading to heightened debt repayment pressures in some regions and the continued importance of addressing implicit debt risks,” the agency quoted lawmaker Huang Shizhong as saying.

‘Cap in hand’

In a recent book about complex political and financial relationships at the lower levels of government, Chinese scholar Tian Xianhong argues that personal favors, political alliances and active fundraising have been a key driving force in ensuring funds keep on rolling in.

“The fact that state power isn’t subject to any kind of public supervision means that governments are highly likely to be extractive in nature,” Chongqing political commentator Zhang Qingli told RFA in a recent interview.

“Local governments have to spend on all manner of things, and have a number of political tasks they must achieve,” Zhang said, in a reference to targets set by the ruling Chinese Communist Party and the central government.

“When there’s not enough in government coffers, they turn to companies [to make up the shortfall],” he said.

Plummeting revenues have meant that local governments across China have struggled to pay state-sector employees in recent years.

Meanwhile, local authorities are growing increasingly reliant on money transferred from Beijing to pay for public services, as a drop in tax revenue and three years of zero-COVID costs pushed them further into the red last year, Bloomberg reported.

Transfer payments from the central government to local levels to pay for education, health care and other general spending are expected to hit 10 trillion yuan (U.S.$1.4 trillion) in 2024, the Ministry of Finance said in its budget report to the National People’s Congress last month.

Tian Xianhong’s book “Resilience” is based on research he carried out in a central Chinese town in May 2019, and documents local officials going “cap in hand” to higher-ranking departments, local companies and other institutions for money.

Informal fundraising of this kind, based on a network of personal, sometimes family, relationships and political patronage, is part of the essential toolkit of a local official, Tian concludes in the book.

‘Get them to pay up’

A resident of the eastern province of Jiangsu who gave only the surname Li for fear of reprisals said the scenario is a familiar one to him.

“Everyone in rural areas knows that local officials make their money from infrastructure projects,” Li said. “What’s more, when engaging in rural infrastructure projects, they like to seek out people [from the local area] who have done well for themselves and ask them for help, get them to pay up.”

Li said no local official could last long in their job without a network of connections to oil the wheels.

“With no connections and nobody higher up to help you, they can’t achieve anything,” he said. 

Guo Min, a former police officer at the Zhuzhou city police department in the central province of Hunan, said even police departments have to engage in fundraising.

“Our police department had insufficient funds to investigate cases,” Guo told RFA in a recent interview. 

“One way to solve the funding problem would be to go cap in hand to various enterprises in our jurisdiction, and ask for funding,” he said.

Another would be to ask for additional “fees” from companies requiring specific kinds of business licenses, while fines were also an important source of revenue, he said.

Translated by Luisetta Mudie.

Former Prime Minister Hun Sen was unanimously approved to become president of Cambodia’s Senate in a move that critics said was meant to protect his son and current prime minister, Hun Manet.

The Senate also approved two senior Hun Sen aides, ex-Foreign Minister Prak Sokhonn and ex-Secretary of State Ouch Borith, to be his vice presidents. As head of the Senate, Hun Sen will be acting head of state when King Norodom Sihamoni is out of the country, meaning that father and son are head of government and de-facto head of state.

The 71-year-old former strongman led the country from 1985 until last year, when he stepped down to make way for his son to assume the role. Supporters of democracy have criticized the passage of power from father to son, saying it amounts to dynastic rule. 

In Wednesday’s session all 62 Senators, including those of the opposition, approved Hun Sen as their president, a Senate statement said.

In theory, the Senate is meant to act as a check on the National Assembly, but in practice in Cambodia – where the ruling Cambodian People’s Party, or CPP, is so dominant – it is essentially a rubber stamp body.

The king presided over the first session of the Senate and asked the Senate to protect the national interest, and Hun Sen during the session thanked the Senate and people for their support.

“The overwhelming support has reiterated people’s confidence in the CPP which is the only party to guarantee peace, stability and development,” he said.  “As the Senate president, I am committed to lead the Senate to actively work with the national assembly and the government to fulfill their mandates responsibly to serve the country and its people.”

Political Commentator Kim Sok said Hun Sen is getting older and should retire, but has to remain active in government to protect his son. 

“He isn’t working to serve the country but to ensure that his son can stay in power,” he said, adding that the former strongman still wields a lot of influence.

He doubted that Hun Sen could improve democracy and unite the country.

“He robbed the voters’ will. He can’t do that,” said Kim Sok. “To serve the national interests, (Hun Sen) needs to talk to (opposition leaders) Sam Rainsy and Kem Sokha to resolve (their conflict) for the sake of the national interest.” he said.

The two opposition leaders together founded the now banned Cambodia National Rescue Party. Sam Rainsy lives in self-imposed exile in France, while Kem Sokha is under house arrest as he appeals a 27-year treason sentence that rights organizations say is politically motivated.

Translated by Samean Yun. Edited by Eugene Whong and Malcolm Foster.

Junta soldiers killed two inmates after secretly removing them from a prison in southern Myanmar, activists told Radio Free Asia on Thursday. 

Troops took 25-year-old Min Thu and 35-year-old Ko Win Thiha from Tanintharyi division’s Dawei Prison on the night of March 17. Both were arrested under the country’s anti-terrorism act, a set of broad laws that cover many actions related to opposing the military junta.

Since the country’s 2021 coup, civilians and activists have been subject to mass arrests for actions ranging from social media posts to suspicion of participating in or funding one of the many rebel groups opposing the military dictatorship. 

A Dawei Political Prisoners Network official, declining to be named for security reasons, told RFA that Min Thu and Ko Win Thiha’s families were informed of their relative’s deaths only after they submitted visitation requests to the prison. 

“Min Thu and Win Thiha, with black hoods on their heads, were taken out of prison by junta soldiers,” he said. “Before they were taken, extensive searches were conducted in the prison. They were taken out of jail and killed after being accused of having things that were prohibited in jail.”

In late March, relatives who went to the prison to request visitation were informed by prison officials of the two men’s deaths, a source close to Dawei Prison said.

Min Thu was am Islamic studies teacher serving a ten-year sentence. RFA could not confirm when he was arrested. Win Thiha was arrested in February 2022 and sentenced to seven years in prison under Section 51(c) of the Counter-Terrorism Law for production or intention to distribute a weapon and Section 505(a) of the penal code for incitement against the military.

RFA contacted the junta’s Prisons Department deputy director Naing Win for comment on the deaths at Dawei Prison, but he didn’t answer the phone.

As of Wednesday, 217 political prisoners are serving prison terms in Dawei Prison, according to a report from the Assistance Association for Political Prisoners.

Translated by RFA Burmese. Edited by Kiana Duncan and Mike Firn. 

Hong Kong’s television stations, crimped by declining earnings, have looked to fill air time with mainland Chinese-related content to attract advertising dollars from China, in a shift that feeds into a vicious cycle that could further alienate the city’s own viewers.

The gradual erosion of press and civil society freedoms in Hong Kong with the Beijing-imposed National Security Law in 2020 and the recent enactment of the second national security law, have all but turned Hong Kong viewers away from the TV stations’ increasingly self-censored news content, which only worsened their credibility and draw as a media.

i-Cable Communications, which runs the Cable News station that was once regarded for its insights and reports on China, saw net losses of HK$589.2 million (US$76.3 million) for 2023, even though the scale had narrowed by a third. 

The company said it was collaborating with the Hong Kong government as part of its commitment to society, to develop programs aimed at fostering a deeper understanding of the government among a public that has been increasingly distrustful of the authorities since the 2019 protests and the subsequent crackdown on democratic figures. The programs included one that raises awareness of national security in schools. 

Collaborations with the Guangdong Radio and Television Station to produce a series of programs were also underway to tap new viewers in the Greater Bay Area, a Beijing-designed regional bloc to integrate the once freewheeling Hong Kong into the mainland Chinese fold.

Public credibility of Cable News is seen to have hit a snag at the end of 2020, after i-Cable fired scores of journalists, among which its best investigative reporters for China news who had reported on issues that would have struck Beijing’s raw nerves, like human rights abuses and the initial outbreak of the coronavirus in Wuhan city.

Morale and credibility have yet to regain, according to a current Cable News reporter who went by the pseudonym Wendy, evidenced by the current high turnover rate in the news department and difficulty to recruit journalists.

“Some reporters left for another TV station because their pay didn’t increase. But it’s also because the degree of freedom now is much lower than before. For example, [in the past] the China team would fly to Beijing to report in-depth. But now most of the reporters in the China team stay in the company to see what’s trending on Weibo,” Wendy said.

Picking up story ideas for China news reports from Chinese social media platforms like Weibo and WeChat has become a staple in newsroom operations. They are relatively safe as the posts would have been scrutinized by Chinese censors within the Great Firewall.

On the other hand, the risks of enterprise news reporting in Hong Kong have risen with last month’s swift passage of Article 23 – the second national security law – which expanded the scope of what constitutes a breach of national security by creating new offenses and increased punishment for offenders. 

But the vague language in the latest legislation also increased uncertainties and fear among local media practitioners on what is lawful to report and what isn’t. Journalists say the propensity to self censor or even not report is a new normal.

Survival of the biggest

In the past era of cable TV pay channels, Cable News was seen as Cable TV’s “trump card” to attract subscribers. However, in recent years, viewers have turned to other free online platforms for more balanced content, in part because broadcasters are under pressure to self censor in a relatively more controlling regime where company management intervenes to avoid offending Beijing. 

The broadcast of Cable News content has since transferred to i-Cable’s free HOY Information Channel.

i-Cable’s plight is not isolated. Losses also clouded Television Broadcasts (TVB), the city’s big brother in broadcasting, which reported a 5.5% drop in net loss to  HK$762.7 million for 2023. 

TVB, in which Chinese private equity firm CMC has a controlling stake, said it is also banking on the Greater Bay Area market to boost viewership. Its mainland China operations revenue is increasing, driven by sales from dramas co-produced with the Chinese companies.

To Yiu-ming, a former journalism professor at Hong Kong Baptist University, pointed out that once a TV station loses credibility for its news coverage, it also loses public support, and will have to rely more on mainland advertisers for profitability.

“You have all the power, but you have lost the masses. You can definitely decide who will head the news department, but you cannot decide how many viewers will watch your content. Now that the economy is growing slower, there will be less substantial pieces of advertisement available. And if there were, they’d go to television stations with higher ratings such as TVB. Which means, TVB, without the support of Hong Kong viewers, can still survive.”

Last month, the Hong Kong government swiftly passed Article 23, which expanded the scope of what constitutes a breach of national security by creating new offenses and increased punishment for offenders.

To Yiu-ming observed that since July last year, TVB’s “Jade” and “Pearl” channels have successfully landed in the Greater Bay Area, directly obtaining advertising broadcast rights and revenue in the southern Guangdong province. This gave them an edge that others lack.

Translated with additional reporting by RFA Staff. Edited by Mike Firn and Taejun Kang.