Some of China’s state-owned property developers are tightening their grip on suppliers, violating the law and worsening the recession

“Construction was completed in 2019 and the school started enrollment in 2021,” he said.

“However, we have not received the final payment yet. We have advance funds [from the firm’s capital] This is to pay workers’ wages and other expenses. ”

But Zhang and his construction company co-founder Tony Lu are reaching the end of their patience.

The delays have been so extensive and hurt Lu’s business that his company may have to file a lawsuit against the developer next year. With the company on the brink of bankruptcy, there are no other options left, he said.

Mr. Lu and many of his Zhuhai peers are disappointed as developers have devised new ways to circumvent the payment requirements, despite strict warnings from the government.

Regarding the middle school, Zhang said, “More than 10 subcontractors for this project, including installation of air conditioners, construction of foundations, and laying of bricks, have not received payments.”

“The company will only say it needs to go through an internal process, which will take several years.”

One developer came up with a clever workaround, Lu said. The plan is to provide apartments to suppliers with only a down payment of about 1 million yuan (approximately US$139,684) per unit. Then, in theory, you can sell the apartment and make a profit.

“Capital funds for payroll payments have already been exhausted,” he added. “[Why do] we have [to give] Does it cost developers more money?This turned out [was used] This will further delay payments. ”

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What’s even more outrageous, he says, is that this process is an implicit prerequisite for subcontractors to increase their chances of winning future contracts from developers.

Local governments also acknowledged that solving the problem is difficult, especially when it comes to construction.

According to documents obtained by the newspaper, economic authorities in major cities in southern China have noticed a significant increase in account balances owed by state-owned enterprises to private companies, leading to a “severe strain on corporate funds.” I admitted that there was.

To make matters worse, some large companies “maliciously delayed payments” and “used their dominant position in the market by refusing to sign contracts or accept inspections of construction work.” ” the official admitted.

China avoids “triangular debt” quagmire by demanding state repayments

In the central province of Henan, an estimated 9.56 billion yuan was found to be owed by local governments and state-owned enterprises to small and medium-sized private enterprises.

Meanwhile, in the more prosperous eastern Jiangsu province, the local audit bureau announced that 12 cities were in default on debts worth 1.62 billion yuan. The rest was owed to private companies for 562 construction and government procurement projects.

In the same month, the Inner Mongolia Autonomous Region, which is suffering from a heavy debt burden, announced that it would issue a special refinancing bond worth 66.32 billion yuan and use the proceeds to settle overdue corporate debts.

Jay Wang, who is employed by the private sector as a subcontractor for state-run power supply companies and real estate developers, also pointed to the difficulties the private sector faces in winning orders.

“Qualified private companies used to be able to bid on state-owned investment projects, but now private companies can only win projects through multiple tiers of subcontractors, who are also subordinated to state-owned enterprises,” he said. “

“As a result, revenues for private companies have decreased significantly.”

According to a report released by the Bank of China, the average collection period for accounts receivable for private industrial enterprises increased from 43.6 days at the end of 2019 to 64.2 days in August 2023, while the average collection period for state-owned enterprises increased by one year. . Approximately 5 days in the same period.

Government measures have been wide-ranging, but the results have been mixed. Peter Chiu, founder of the Globalization Center think tank in Hong Kong, said at a forum in Guangzhou in early December that China had introduced 131 measures to support private enterprises over the past 18 years.

“After a little research using ChatGPT, we found that there were very few substantive differences in the wording. [of the policies]But the economic situation has changed a lot,” he said.

Li Mingbo, deputy director of the Guangzhou Greater Bay Area Institute, said at the same forum that private entrepreneurs as a whole still lack confidence.

“Current policies do not address some of the issues that private entrepreneurs are most concerned about,” Lee said.