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Officials who rack up massive local debt will be denied promotion
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ALTHOUGH four months have passed since Ji Jianye fell from grace, lessons about his downfall in Chinese politics still resonate.
Ji, ex-mayor of Nanjing, capital of Jiangsu Province, was famous for turning the city into a mega-sized construction site — and he did so with borrowed money. He was investigated by ombudsmen in mid October for disciplinary violations.
According to ifeng.com, a news portal, Ji invested 200 billion yuan (US$33 billion) in infrastructure projects in Nanjing. As a result, the city is shrouded in dust.
A big chunk of the investment comes from public loans, raising inevitable concerns about fiscal health. Ji dismissed the concern, saying he went ahead despite criticism because the urban face-lift was in the interests of the local residents.
To some extent, Ji is typical of those cadres bent on incurring debts to fund their pet projects.
Reckless borrowing and wasteful spending have long been a threat to China’s fiscal well-being. Many localities are up to their necks in debt.
Strong Nation Forum, an online forum affiliated with People’s Daily, recently cited a 2011 national audit report in saying that only 54 county-level governments were not in the red in 2010.
Given the extent of local debt, a ticking time tomb, authorities have decided to confront its root cause — by denying career advancement to officials who rack up too much debt.
Indebtedness as new criterion
Worse, according to the edict, published on December 9 by the Department of Organization of the Party’s Central Committee, from now on the evaluation of officials will include indebtedness as a new criterion.
Whoever leaves behind a pile of debts will be disciplined, even if they are retired. This is the first time that the department came up with something so forceful to quench the thirst of bureaucrats for GDP growth, often their ticket to promotion.
Considering that China’s urbanization is tantamount to fixed asset investments, quite a few cadres lacking creative ideas on how to spur the economy have found the building binge a relatively easier way to leave their mark. And once in higher office, they are not held accountable for the debts they created. Their successors, more often than not, will be happy to just follow suit by borrowing more.
One quick way to remedy this sort of unsustainable development model, and to cut deficits, is to sell land, which in turn could lead to land grabs and social unrest. Clearly, all these unpalatable outcomes are associated with the wrong official incentives.
Infrastructure projects are known to be hotbeds of corruption, in the form of kickbacks from contractors to officials in return for their favors.
From this perspective, the department’s edict has wide-reaching implications for fiscal health, an improved urbanization model and the fight against graft. It is a stone that may kill several birds.
But as usual, the devil is in the details. A key question is whether the mayors of heavily indebted cities will be punished. If the answer is yes, there will be a massive shake-up of bureaucracy.
The rules on punishing “deficit mayors” should be made clear to have teeth. Otherwise, the well-meaning edict will end up just like preceding environmental gauges on official performance.
Too often cadres are promoted for enhancing GDP, regardless of their environmental records and regardless of whether they create pollution in the quest for GDP.
Hopefully the new edict means business.
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