Residents of China's so-called richest village, Huaxi, where everyone is a shareholder, have been asked to stay at its luxury five-star hotel to "drive consumption" after the town-corporation in Jiangsu province began posting losses, Chinese media reported yesterday.
More than 2,000 Huaxi residents are shareholders in Jiangsu Huaxi Group, which is run by village officials and is listed on the Shenzhen stock exchange. Losses started accumating in recent years, so last the year the company reduced dividends and distributed coupons that can be used to pay for Huaxi services, such as staying at the hotel.
Quite a few villagers have taken up the hotel offer, with some moving their entire families into the Long Wish Hotel International for a month or more, The Beijing News reports. The 74-floor hotel towers 328 metres above the village and cost 3 billion yuan (HK$3.7 billion) to build. It reportedly contains a solid gold statue of an ox weighing a tonne.
But even with higher occupancy at the hotel, its deputy manager feared that hotel revenue was still unlikely to pick up much because of President Xi Jinping's austerity drive.
According to the newspaper, services including helicopter rides for tourists and wedding celebrations are also relying on Huaxi clients.
The company's share price has tumbled in the last two years. Before 2002, share traded for between 20 to 30 yuan, abut at the end of last month, were worth just 3.8 yuan.
The village's annual revenue dropped 26 per cent last year, to 2.6 billion yuan from 3.5 billion yuan in 2011.
The corporation is expected to post a loss of between 10 million yuan to 15 million yuan in first quarter of 2013, according to an statement two weeks ago.
The downturn in Huaxi's pillar industries of steel and textiles is the main reason behind the losses, a senior official said.
Once contributing nearly half of Huaxi's entire profits, the steel plant was hit by the nationwide overproduction of recent years.
The two industrial operations posted a combined loss of 200 million yuan last year, according to a Chinese weekly magazine.
Huaxi's title of the "richest village in China" harks back to when it did make money after its late long-time leader Wu Renbao steered the town away from farming to manufacturing and trade after the launch of economic reforms in the 1980s.
In better times, the village was hailed as one of the most successful small-scale economic models in China, demonstrating how a town could get rich under economic reforms while staying true to socialist ideals by sharing its wealth.
Since Wu died last month at 85, from lung cancer, some ask whether his successors can continue his legacy.