China’s governance relies on local administrations to fund services and manage infrastructure.
These regional bodies have long depended on land sales and borrowing to finance their budgets.
While this approach worked during periods of rapid economic growth, it has become strained as the country faces slower development and a struggling property market.
Local governments are now turning to unusual solutions to address their financial challenges.
Accepted Apartments as Payment
In Xinjiang, a gas supplier recently accepted more than 260 unfinished apartments in lieu of $25 million owed by state-owned entities in Changji.
Xinjiang East Universe Gas plans to sell the apartments once construction is complete to recover what it is owed, according to Hotnews.
This type of agreement is becoming more common in China as both public agencies and private firms struggle to balance their books.
The property crisis that began in 2022 led to a cascade of financial problems for developers, many of whom started using apartments as payment to creditors.
Now, local governments are following suit. Shanghai Urban Architecture Design, for example, took possession of 115 apartments from Greenland Holdings to settle $10 million in unpaid debts.
In Guizhou, police departments have transferred housing units to creditors to resolve financial disputes.
The root of the issue lies in the collapse of the real estate market, which has drastically reduced the income local governments earn from selling land.
This has resulted in tight budgets that affect wages, public services, and infrastructure projects.
While Beijing has allocated $164 billion to assist local authorities, the problem persists as revenue continues to fall.
China’s property market now holds an estimated 90 million vacant homes — enough to house Brazil’s entire population.
As housing prices decline, these properties lose value, making them less effective as repayment tools. Experts warn that relying on such trades is a short-term solution that does little to address the deeper issues.
