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Amanda Lee

An unfinished vanity project in one of the poorest regions of China – made infamous on social media several years ago over its hefty price tag – has been thrust back into the spotlight, as Beijing considers more extensive stimulus to rescue its debt-ridden local governments and buoy economic growth.
Dushan, a county with a population of just over 350,000 in the landlocked southwest province of Guizhou, caught the nation’s attention in 2020 after a video spread online featuring some of the area’s costly construction projects. Among the most high-profile boondoggles was a 99.9 metre (329 feet) wooden building the county hoped would win global recognition.
The Dushan government admitted to “reckless borrowing” following the release of the video, vowing to correct its mistakes by turning some unused buildings into more commercially viable spaces.
Analysts said efforts by local governments to turn failed projects around might not help cover the large revenue gap left by poor land sales and declining tax revenue. The debt burdens of local governments have been significant enough to hamstring the country’s economic recovery, along with a real estate slump, weak consumer confidence and deflationary pressures.
“While local governments generally have some room to raise alternative revenues, it is unlikely that these will fully compensate for the revenue gaps arising from declining traditional revenue items, such as land sales,” said Wenyin Huang, credit analyst at S&P Global Ratings.
Concerns have grown that without additional financial support from the central government, localities like Dushan might not be able to meet their debt obligations, raising the spectre of a broader, economy-spanning impact.


Lan Foan, China’s finance minister, said on Saturday that the ministry would carry out a one-off debt swap at a scale that would be the “largest in recent years”, alongside the continued use of bond quotas for debt resolution. These, Lan said, would allow local governments to allocate more resources to developing the economy and lifting business confidence.
But analysts are split over how much heft Beijing will wield in this latest round of debt resolution, saying to improve local government finances in the long term, significant reforms to China’s tax and economic structures are also required.
Between 2015 and 2018, 12.2 trillion yuan (US$1.71 trillion) in new local government bonds were issued to swap for extant “hidden debts” to reduce financing costs for regional authorities.
However, debt continued to pile up. The central government approved a total of 1.13 trillion in special bonds to swap for hidden debts again from 2020 to 2022. And from 2023 to 2024, the ministry of finance earmarked a total of 3.4 trillion yuan in the bond quota to aid in the resolution of local government debts.
Nomura has projected the size of this new debt swap to be closer to that of the 2015-2018 programme, but Huang of S&P said several trillion yuan would be more likely, prioritising highly indebted regions for greater effectiveness.
In Dushan’s case, the debt overhang is so large it could take some years to correct. The wooden tower has won notoriety, but not as its builders intended – instead, it is a symbol of excess.




Several Chinese media outlets have reported the Zilin Mountain Holiday Villa hotel – the new operator of the massive structure – is set to open soon, but none provided a timetable. Now blue and white instead of the more naturalistic colour scheme seen earlier, the hotel was seeking applicants for several positions in advertisements published in August.
Through the use of local government financing vehicles (LGFVs) – semi-private entities used to skirt rules on borrowing – Dushan went on a construction spree between 2012 and 2018. It racked up 40 billion yuan in outstanding debt according to the Central Commission for Discipline Inspection, the national-level Communist Party agency in charge of anti-corruption investigations.
Dushan reportedly spent 200 million yuan on the wooden structure, 30 million yuan on a clock tower and 5.6 billion yuan on a themed town, some of which were clearly unfinished in the video from 2020.
According to YY Rating, most of Dushan’s debt was financed by short-term borrowing, private placements and wealth management products, meaning the costs of borrowing were much higher than the cost of traditional bank financing.
In 2023, Dushan logged total revenue of 7.6 billion yuan, up 14.9 per cent from 2022. It was on China’s list of impoverished counties until 2020.
Fitch Ratings said long-term debt repayment by LGFVs hinges on China’s overall economic growth and their ability to establish sustainable profit models.
“Although LGFVs are working towards greater self-sufficiency in debt servicing, there has been no significant improvement in profitability,” the US rating agency said in a research note on October 7.


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A big-spending county in one of China’s poorest provinces has become a topic of discussion again as local debts still encumber economy


A big-spending county in one of China’s poorest provinces has become a topic of discussion again as local debts still encumber economy.


China economy

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Chinese county, infamous for lavish projects, back in spotlight as local debts linger

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}A big-spending county in one of China’s poorest provinces has become a topic of discussion again as local debts still encumber economy

A big-spending county in one of China’s poorest provinces has become a topic of discussion again as local debts still encumber economy