The photo taken on April 19, 2019 shows apartments in Hegang, Northeast China's Heilongjiang Province. Photo: VCG

Hegang, a city in Northeast China's Heilongjiang Province, has recently been put in the spotlight, after it became the first prefecture-level city in the country to be subject to a fiscal reorganization.

A statement by the local government revealed the cancellation of plans to recruit grassroots government staff due to the implementation of a fiscal reorganization, online news outlet guancha.cn reported on Wednesday, adding that Hegang became the country's first prefecture-level city to engage in a fiscal reorganization.

According to contingency plans unveiled by the State Council to cope with local government debt risks, if governments at prefectural and county levels see their annual interest payments on local general government debt exceed 10 percent of their public spending budgets, or the interest payments on special debt top 10 percent of local government funding budgets, fiscal reorganization plans will be launched, according to the report.  

That suggests local fiscal coffers are facing extreme difficulties and require precautionary measures to avert bankruptcy, the report said.  

Currently, the city with a population of 890,000 has an annual fiscal revenue of more than 2 billion yuan ($314.71 million) but its public expending goes over 10 billion yuan ($1.5 billion). 

As of the end of 2020, the city, heavily reliant on fiscal transfer payments from governments at higher levels, posted 13.11 billion yuan ($2.1 billion) in outstanding local government debt, according to the report.

The city has already received much fanfare on Chinese social media as local home prices are reputed as cheap as Chinese cabbage, with some of local apartments asking for tens of thousands of yuan apiece, merely a fraction of their equivalent in bigger cities. 

The reorganization is expected to align the city's debt levels with its repaying capacities along with a raft of measures such as broadening sources of income, reducing expenditures and handling government debt be achieve balanced fiscal revenues and spending, the report disclosed. 

The city's economy grew 0.3 percent in 2020 from the previous year, official data showed, underperforming a 2.3 percent expansion in the Chinese economy as a whole. 

Global Times