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

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

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A county of China’s Guizhou province has become a symbol of reckless spending and unsustainable debt. Photo: Weibo

Published: 1:00pm, 21 Oct 2024

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.