At the ninth meeting of the Standing Committee of the 12th National People's Congress held recently, the audit report in the hands of Liu Jiayi, Auditor General of the Audit Office, was obviously an "extended version" of previous years, and the extra space was basically used for "roll call."
In fact, driven by the temptation of generous profits, the chaos of local financial subsidies has never subsided. The reporter learned that in recent years, a large number of "strategic emerging industry" companies such as LED have received high local subsidies.
It is difficult to see whether these subsidies can stimulate the economy and create employment in the long term as local governments want, but it is true that they help companies improve their performance and directly affect fair competition in the market.
The amount of subsidies is huge
Take the two LED listed companies Sanan Optoelectronics (600703.SH) and Dehao Runda (002005.SZ) as examples. They both received high local subsidies from 2011 to 2013.
Sanan Optoelectronics received subsidies as high as 843 million yuan, 483 million yuan and 458 million yuan in three years. Dehao Runda also received subsidies of 310 million yuan, 224 million yuan and 232 million yuan in the same period.
In addition to LED companies, photovoltaic companies also receive considerable subsidies from local governments. Sungrow (300274.SZ), Zhongli Technology (002309.SZ) and Yi Jing Optoelectronics (600537.SH) are all major subsidies.
At the end of 2013, the government subsidy (end book balance) of Yi Jing Optoelectronics was as high as 123.3 million yuan. The amount of local and related subsidies for other photovoltaic companies also ranged from tens of millions to hundreds of millions of yuan each year.
"The subsidy list of our company and other companies is really dazzling." The chairman of a listed photovoltaic company that has received relatively high subsidies told reporters that their subsidiaries are relatively dispersed, and each subsidiary may receive a corresponding subsidy amount. The local government is also more supportive of their business and is willing to allocate relevant subsidies.
Local Investment Chasing Competition
Local governments also provide various subsidies to enterprises.
Taking Sanan Optoelectronics as an example, its top three subsidies in 2012 and 2013 were financial subsidies for three science and technology funds, government subsidies for MOCVD equipment, and sales subsidies for high-power concentrated solar energy. Among them, local government subsidies for MOCVD equipment have increased year by year: from 38.29 million yuan in 2011 to 92.625 million yuan in 2012 and 140 million yuan in 2013.
MOCVD is the core product for the production of epitaxial chips (LEDs). It is mainly produced by two overseas companies, Aixtron and Veyco. They have long held 90% of the share of MOCVD, and the price was previously relatively expensive.
In order to promote the development of the local LED industry, domestic local governments have implemented large subsidies since 2009. Most places use subsidies as an excuse to attract LED manufacturers to purchase MOCVD equipment.
Liang Bingwen, founder of Guangda Optoelectronic Equipment Technology (Jiaxing) Co., Ltd., told reporters that this type of subsidies started in Yangzhou in 2009, and subsequently Xiamen, Foshan and Wuhu joined the subsidy lineup. "At that time, a MOCVD equipment cost 2.5 million U.S. dollars, and the local subsidy amount was about RMB 8 million to 10 million yuan per unit." Liang Bingwen said that stimulated by such subsidies, foreign MOCVD companies also achieved record performance.
However, due to excessive purchases of MOCVD by Chinese companies in the past few years, two overseas companies have experienced overproduction and have recently begun to reduce prices significantly.
Even so, local government subsidies have not been reduced, and it is still relatively easy for companies to receive subsidies. For example, a domestic LED company continued to receive a subsidy of 8 million yuan per unit at the end of 2013.
"This is unfair to other competitors." Liang Bingwen lamented that he is also a manufacturer of LED epitaxial chips. Without local subsidies, the price of the final product can only be sold higher than the cost price. However, companies like Sanan Optoelectronics and Dehao Runda can sell at a loss. "Companies focus all their energy on how to obtain subsidies, rather than market strategies and scientific research investment." Liang Bingwen said.
In fact, some local governments do not have that much fiscal budget, but use bank loans to "subsidize" enterprises.
In addition to receiving subsidies, some LED companies will also receive large local lighting contracts, and local governments will benefit from the company's sales, profits and taxes in the next few years or even longer. However, this operation is only a preliminary calculation. It is actually unknown whether the settled companies can make profits and contribute back to the local area as the government expects.
There are many ways to obtain subsidies
For companies that want to obtain government support, there are also many ways to obtain subsidies.
Liang Bingwen gave an example to reporters. With the current sharp price reduction of MOCVD equipment, domestic purchasers have sufficient say. They can pay a small advance payment to obtain MOCVD equipment and put it in the warehouse; at the same time, domestic purchasers obtain local equipment subsidies (8 million to 10 million per unit) through corresponding operations. In this way, some companies can not only directly amortize the purchase of equipment, but also have excess funds to invest in other areas.
In addition to receiving MOCVD subsidies, domestic LED companies can also apply for subsidies from local governments in the name of building LED technology centers and industrial bases.
An industry insider who did not want to be named admitted that in the face of huge interests, there is indeed an act of defrauding government financial subsidies, and corruption may also breed. Who will determine whether it meets the subsidy standards? There is a lot of room for rent-seeking.
In order to prevent irregular behaviors such as "cheating subsidies", the relevant departments have since changed this "ex-ante" subsidy to an ex-post "kWh subsidy". Enterprises need to connect the project to the grid before they can receive relevant subsidy funds.
ANNA