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Amanda Lee

When video clips of crowds scarfing down barbecue skewers in the industrial city of Zibo went viral on social media last year, it became an unexpected role model for spurring consumption in other Chinese regions with economies in the doldrums.
But Zibo’s success in capitalising on the popularity of grilled foods on a stick, by highlighting it in a tourism drive that earned it the nickname of China’s “outdoor barbecue capital”, appears to have done little to fire up its deteriorating finances.
While tourism can help drive traffic to amusement parks, restaurants, hotels, retailers, and transport providers, analysts say local governments are not likely to benefit significantly in terms of tax revenue.
“But it will help boost local employment, grow service industries and improve the city’s brand – which may attract more investment in the future,” said Sherry Zhao, senior director for Asia-Pacific international public finance scores at Fitch Ratings.
The local government of Zibo, in eastern China’s Shandong province, said in its latest financial report for the year 2023 and for the first half of 2024 – published last week – that its debt pressure had worsened. Authorities said poor land sales, weak assets, low credit ratings, and a high threshold for refinancing its debt were among the key reasons.


In the first half of 2024, Zibo’s public expenditures and repayments of principal and interest on its outstanding debt totalled 22.1 billion yuan. But available financial resources amounted to only 20.6 billion yuan (US$3.12 billion), resulting in a deficit of 1.5 billion yuan, the financial report said, adding that the city’s overall debt growth was higher than the average in Shandong.
According to estimates by Huaxi Securities, the growth rate of outstanding debt from local government financing vehicles (LGFVs) in various Shandong cities was mostly above 10 per cent in 2023.
However, the growth rate of general public budget revenues was mostly below 8 per cent in 2023, and the disparity highlights struggles facing many cities in the province as they tried to make ends meet last year, Huaxi Securities said.
LGFVs are hybrid entities that are both public and corporate, created to skirt restrictions on local government borrowing.
Huaxi Securities also estimated that Zibo’s LGFV debt growth rose by 28 per cent in 2023 from 2022 – higher than the average of 13.3 per cent in 16 cities in Shandong. And Zibo’s gross domestic product growth was 5.5 per cent for 2023 compared with Shandong province’s 6 per cent.
Often smaller business participants in tourism activities may not even meet taxable thresholds
Wenyin Huang, S&P Global Ratings
Zibo authorities said in 2023 that the city had spent 68.06 million yuan on consumer vouchers to boost tourism, and that this helped lead to 759 million yuan in consumer spending.
The rise in spending also raised Zibo’s tourism income to 63 billion yuan in 2023, up 68 per cent, year on year.
But entities that are involved in tourism might not immediately become profitable, which would help drive up tax revenue for local governments, analysts said.
Tax collection still relies on the profitability of bigger companies, said Wenyin Huang, a credit analyst at S&P Global Ratings.
“Often smaller business participants in tourism activities may not even meet taxable thresholds,” Huang said, adding that the central government currently collects 100 per cent of the consumption tax, so reform is needed to allow regions to receive a share of that tax.
Meanwhile, many local governments are still being required to increase public spending via LGFVs.

According to a research note from S&P Global Ratings on September 4, directives to local-level governments from higher-level authorities – such as instructions to buy property from developers, participate in land auctions, increase social housing and develop infrastructure – require additional capital.
But as Zibo authorities noted in their September 3 financial report, “refinancing capacity is severely limited”.
“Combined with the concentration of upcoming debt repayments and the requirement of optimising capital structure, the risk-prevention situation of local government financing vehicle bonds has become more severe,” they said in the report.
They also noted how tax revenue has been on the decline since the start of the year, and that it would likely get worse because of poor land sales and a rise in public spending. As such, the city has had to rely on non-tax revenue sources, including proceeds from state-owned-asset sales, fines and confiscated property.
Zibo is not alone in seeing its tax revenue plummet. For the first seven months of this year, China’s tax revenue saw a year-on-year decline of 5.4 per cent to 11.1 trillion yuan, according to data from the Ministry of Finance.
In contrast, China’s fiscal income from non-tax items jumped 12 per cent during the period to 2.4 trillion yuan.


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Firing up the grills boosted Zibo’s national profile and lured millions, but it has done little to economically transform the heavily indebted city


Firing up the grills boosted Zibo’s national profile and lured millions, but it has done little to economically transform the heavily indebted city.


For China’s barbecue capital, reality bites as debt risk stokes fire of economic distress

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Firing up the grills boosted Zibo’s national profile and lured millions, but it has done little to economically transform the heavily indebted city

Firing up the grills boosted Zibo’s national profile and lured millions, but it has done little to economically transform the heavily indebted city