There are huge challenges ahead for the city of Hefei in Anhui Province, which needs to raise 45 billion yuan (US$5.68 billion) over the next five years for its city construction plans, according to a Southern Weekend report on September 28, 2006.

On September 17, the city announced that they will invest 3.6 billion yuan (US$455 million) to build and improve 40 roads by the end of this year. Over the 11th Five-year Plan period (2006-2010), they plan to invest a total of 45 billion yuan (US$5.68 billion) in infrastructure construction. They have set goals to increase the city’s gross domestic product (GDP) from 80 billion yuan (US$10.1 billion) to 200 billion yuan (US$25.2 billion).

However, city revenues last year were less than 6 billion yuan (US$758 million), which poses a huge challenge if Hefei authorities are to see the 45-billion-yuan project through. But local officials said candidly that they had to persevere.

"Hefei's roads are too narrow, the buildings are too low, and the city is too small," an official said, adding that as a provincial capital, "Hefei is not good or decent enough."

He said Hefei doesn't aim to rival major cities like Beijing and Shanghai, but with other cities in central China.

With similar financial situations and geographical positions, Changsha invests 20 billion yuan (US$2.52 billion) in city construction, Wuhan 15 billion (US$1.8 billion), and Zhengzhou and Nanchang 10 billion (US$1.2 billion) each every year. Hefei's annual 2-billion-yuan (US$252 million) city construction input pales in comparison.

Sun Jinlong, secretary of the Hefei Municipal Committee of the Communist Party of China, approached the China Development Bank in Beijing in search of investments, and secured a 10.8 billion yuan (US$1.36 billion) loan in July 2005. He has also sent a 60-member leadership team on a fact-finding mission to Zhejiang Province.

Other loans have been procured from commercial banks, foreign governments, and international financial organizations. By the middle of this year, the city had raised 5.5 billion yuan (US$695 million).

But this is still not enough.

In May, the Hefei Investing and Financing Administration Commission was launched. With an initial investment of 500 million yuan (US$63.2 million), the commission amalgamated construction, traffic and manufacturing companies to form the Heifei Construction Investment Holding Group Company.

Through the holding company, Hefei city was able to issue bonds, raising 1 billion yuan (US$126 million) as of September 20.

However, it still needs to make up a significant shortfall if it’s to hit its targets. The municipal government can only offer 2.5 billion yuan (US$316 million), which leaves the holding company to raise another 6.5 billion yuan (US$821 million). In addition, Hefei would need to set aside 800 million yuan (US$101 million) every year in loan repayments.

According to the Hefei Investing and Financing Administration Center, these obligations translate into a required annual cash flow of 5 billion yuan (US$632 million).

(China.org.cn by Zhang Rui, October 8, 2006)