China’s debt-fuelled county admits ‘reckless borrowing’ after video questions 40 billion yuan construction spree
- Dushan County in the landlocked southwest province of Guizhou, one of the poorest regions in China, has built a number of white elephant projects over the last four years
- Since its release on Sunday, the ‘How Dushan Burnt 40 billion’ video has been viewed over 27 million times on Weibo, China’s Twitter-like social media platform
A county-level government in China has vowed to make changes after a viral online video raised questions over its debt-fuelled 40 billion yuan (US$5.7 billion) construction spree that began in 2016.
Since its release on Sunday, the How Dushan Burnt 40 billion video has been viewed over 27 million times on Weibo, China’s Twitter-like social media platform.
The county, with a population of just 370,000 according to the 2017 census, has embarked on a construction spree for the last four years with a number of white elephant projects, including a 99.9 metre (329 feet) high wooden building that it had hoped would earn recognition as a Guinness World Record.
In view of previous reckless borrowing, [local government] performance boasting, and unfinished projects, [the county government is] working in accordance with laws
But the 200 million yuan (US$28.6 million) structure is shown to have been abandoned, with the video’s presenter questioning how such projects could add value to Dushan.
“In view of previous reckless borrowing, [local government] performance boasting, and unfinished projects, [the county government is] working in accordance with laws, and constantly correcting our ideas in development, purifying the political ideology, and standardising decision making, strengthening project management, and effectively moving towards the rectification of problems,” the county government statement said.
The statement did not directly mention the video, but it promised to turn some of the unused buildings into more commercially viable developments, including converting the wooden building into a hotel, while also changing the way it manages construction projects.
According to a daily newspaper owned by the nationwide Central Commission for Discipline Inspection, the Chinese Communist Party’s agency in charge of anti-corruption investigations, Dushan had an outstanding debt of over 40 billion yuan in 2018, compared to its annual revenue of just 1 billion.
The performance of local government officials was long evaluated almost entirely on the basis of their ability to produce economic growth, leading to rapid rises in borrowing, with funds often used to finance construction projects that were not able to deliver a return.
According to research by Haitong Securities, two out of the 23 investment vehicles that had defaulted or delayed interest payments in 2018 were related to Dushan County and involved total investments of 500 million yuan (US$71 million).
A number of Dushan County officials were the subject of investigations in 2018 by the Central Commission for Discipline Inspection after the central government found that the county had been covering up illegal land use.
The Guizhou branch of the Chinese Communist Party’s disciplinary watchdog said in October 2018 that at least 10 Dushan officials had been removed from their positions.
Pan Zhili, Dushan’s former party secretary who was deemed responsible for the debt crisis, was charged with taking bribes and abuse of power in December 2019.
The more grass roots they are, the more limited in information disclosure
Fitch Ratings said in a report in May that the credit situation, especially for those from less-developed provinces, was unlikely to improve due to rising uncertainty within China’s economy, which will weigh on local governments’ budgetary performance.
Yang Zhiyong, a researcher with the Chinese Academy of Social Sciences, a think tank affiliated with the State Council, said Dushan’s case was an “old problem’, highlighting urgent and important problems in government disclosure at grass roots levels, which have hindered supervision efforts by regulators.
“The grass roots government has relatively few sensitive matters, and they are in better positions when it comes to disclosure. But in reality, the more grass roots they are, the more limited in information disclosure,” Yang said in an article published by the 21st Century Business Herald on Wednesday.
