Local Govts to Central Govt: We Will Take Your Reforms Under Advisement

Local governments are proving to be the stumbling block for central government reforms once again. Much needed cuts to steel production and hukou reform could be the latest victims.

On hukou reform: Chinese municipalities may not want unskilled labor in their cities. Instead, they may use hukou reform to attract talent away from other cities, but stop short of fully opening up to population movement. A game of hot potato will commence, with cities try to skim as much talent off the top, while resisting an "open door" policy. The latter would solve housing inventory issues, but might strain budgets, particularly if any housing subsidies fell on the local government. Social welfare will also be available to migrants if they obtain hukous and if many are low skill or unskilled, welfare use (such as it exists) may be significant for cities feeling the bite from falling land sales. This is enough of a concern that it was directly addressed by CASS.

CASS research report released on the 25th, the reform of the household registration system should not only consider the development of the elite. Differentiated policy should not become settled into the city of layers of screening.

The report said, "If the local accounts as a reward talented people of prizes, the household registration reform so that few have the ability to become the elite of the city want to get their accounts, then I am afraid that such reform is not only not solve the fundamental problem, but also bring new social conflicts."

...The traditional household registration system affect China's urbanization process of sustainable development. Since the reform and opening up, China has a large number of rural population work in the cities every year inflows, but because of household registration can not be successfully settled in the city, can not enjoy the social benefits provided by the city, causing a large number of migrant workers walk in the countryside and the city room, forming a "pseudo-urbanization" or "counter-urbanization" phenomenon, and caused urbanization is not complete, not happy, unsustainable phenomenon.

Sine: 社科院:户籍改革不能只让少数精英落户

On steel: local governments are subsidizing local mills.
Local governments are still giving steel producers hundreds of millions of yuan in the apparent hopes that the big contributors to public coffers will rebound and not have to lay off large numbers of workers.

Lingyuan Iron & Steel Co. Ltd., a state-owned manufacturer in Chaoyang, in the northeastern province of Liaoning, recently got 790 million yuan from the city government, the company said on December 25.

Rather than allowing market forces to reinvigorate the industry, the local government's payouts hurt the central government's efforts to reduce excess capacity, said Hu Yanping, an analyst of Custeel.com, a website run by the China Iron and Steel Association (CISA).
Perhaps the slide into the abyss will be avoided this year? We'll know in about three months.
Caixin: Steel Firm Subsidies 'Get In Way of Efforts to Trim Overcapacity'

They're also building more coal plants: Misalignment of Energy Goals Fuels Appetite for Coal
Provinces were still handing out large numbers of permits to build new coal plants to shore up regional growth figures even the country experienced its worst electricity oversupply ever in 2015, experts say.

Meanwhile, not a few local governments are headed into a debt crisis:
Chen Zhu, vice chairman of the NPC Standing Committee, said he was worried that some local governments may face de facto bankruptcy in the future.

Chen's view was shared by other legislators including Liao Xiaojun, who warned incompetence in handling local government debt would lead to systemic risks.
Chinese legislators call for efforts to control local gov't debt

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