More signs of trouble in China. This time the news is that cash-strapped local governments are having to sell off the luxury cars assigned as perks to government officials. These cars are a badge of office throughout China’s vast bureaucracy, even in the middle ranks of government. Such perquisites have traditionally attracted considerable anger among the population. Particularly ostentatious vehicles (it’s not unknown, albeit rare, for officials to own Porsches or Maseratis) are often photographed and posted online to highlight official corruption.
That these cars are now being sold off en masse is a harbinger of economic slowdown, the Financial Times reports:
Wenzhou, a south-eastern coastal city hit hard by the cooling economy, sold 215 cars at the weekend, fetching Rmb10.6m ($1.7m). It plans to sell 1,300 vehicles – 80 per cent of the municipal fleet – by the end of the year.
Government revenues from tax and land sales in Wenzhou have been declining after years of heady growth. With the city’s risk-taking businesses struggling to pay back debts, the burden has fallen on the local government to turn things around. State media noted the auctions would directly boost the city’s coffers.
These luxury car fire sales may be a more reliable economic indicator than some of the statistics published by the government. We can be sure that local officials would hold on to their Porsches for dear life unless the revenue outlook were particularly dire. Since a large portion of local government revenue in China depends on things like land sales to real estate developers, empty coffers at the local government level are a pretty strong signal that things are not going well.