Local Government Revenues Slide, Govts Use Fees to Cover Pension Deficits

Shanxi, Liaoning and Heilongjiang, along with Xinjiang and Qinghai, have seen their provincial government revenue fall from last year. The shortfalls are a significant problems due to many companies avoiding pension contributions, while at the same time SOEs accelerate retirements amid the economic slowdown.

The deficits aren't new: in 2013, Heilongjiang saw a ¥4 billion shortfall in pension cash flow, with the net figure dropping almost 1500% from a year earlier. The provincial governor blamed a surge in retirements from state-owned firms as the reason for pressure on the pension system.

At the national congress that year, Li Keqiang asked Heilongjiang governor Lu Hao:
"Is there a pension arrears problem?"

"This year there is no problem, but next year, the year after, difficulties may arise." Lu Hao replied.

Premier Li Keqiang on the spot promised pensions for normal gap, the state will try to support. "Many of our older workers, before retiring in state-owned enterprises, in particular the period for the development of the Republic of have made a special contribution." He said. "Now they retired, the state should protect their lives, should ensure that they are happy in old age!"

Currently, Liaoning and Heilongjiang have not yet announced the first three quarters of economic performance data. Data show that in the first half, Liaoning was at the bottom with 2.6% growth, Heilongjiang ranked third from the bottom with 5.1% growth.
Slowing revenue growth is biting especially hard in 2015:
Ministry of Finance data released by downward pressure on the economy, industrial producer prices (PPI) continued to decline and the impact of the implementation of structural tax cuts and lower fees universality of factors, from January to September, the national, central and local government budget income increases were 5.4%, 5.6% and 5.1%, respectively, down 2.7, 0.4 and 5 percentage points.
Weak growth is causing companies to shirk on their social insurance payments:
Yang Yongqi social security law expert, told reporters that "the economic downturn is seeing a large increase in legal disputes related to social insurance. There's already many cases in Beijing."

Currently, according to the pension fund to pay tagging, individual required to pay 8% wage base, companies pay 20%. In more cases occurred in the present, Yang Yongqi said, "appears to completely avoid payment of the various social security situation, including business owners and workers to sign false labor contracts." In addition, "There are companies in order to reduce the payment of pensions, only accordance with the minimum standards for the payment of pensions, that pensions paid less. "
As a result of slowing revenue growth, governments can no longer make up the difference. This has led to a surge in "unconventional fees" designed to plug the gap, but which also damage the local economy:
"In the past, the structure of financial subsidies, local financial subsidies less pension, mostly by the central government to make up, but now, under the new normal, the central government and local governments are subject to greater constraints. Perhaps, subsidies structure will be some dramatic changes. "ZhengBingWen said.

In addition, ZhengBingWen say, there will be a dramatic change, that is "unconventional payment," the proportion may have an upward trend for some places, it is clear that this is the place to alleviate financial constraints a way, this is our stakeholders It should be noted in advance, in fact, this is a "transfer" is not conducive to improving the competitiveness of enterprises, it is not conducive to ease the downward pressure on the economy.

iFeng: 地方财政收入吃紧 养老金或现非常规缴费

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