Anyone seeking evidence of a local government debt binge in China should check out Loudi. Bloomberg’s Henry Sanderson and Michael Forsythe recorded construction of a giant stadium in this tier 2 city:
Workers toil by night lights with hoes, carving out the signs for Olympic rings in front of an unfinished 30,000-seat stadium, bulb-shaped gymnasium and swimming complex in a little-known Chinese city.
Loudi, home to 4 million people in Chairman Mao Zedong‘s home province of Hunan, is paying for the project with 1.2 billion yuan ($185 million) in bonds, guaranteed by land valued at $1.5 million an acre. That’s about the same as prices in Winnetka, a Chicago suburb that is one of the richest U.S. towns, where the average household earns more than $250,000 a year.
Other nearby cities are much the same:
The building binge fuelled by this mound of debt is evident a few hours’ drive into the hills of Loudi from the provincial capital of Changsha. Cranes abound amongst new high-rise apartment complexes with names like Wealthy City, surrounded by billboards showing pictures of Caucasian women strolling through shopping malls featuring brands like KFC and Microsoft.
China Bears see projects like these and the life-size reproductions of Greenwich, Conn and Hallstatt, Austria and an old-fashioned British town plus dozens more ghost cities and hundreds of giant infrastructure projects.
Nearly $1 trillion in outstanding local government debt may never be repaid, Standard Charter’s Stephen Green tells Bloomberg.
Here’s a video:
Don’t miss: New Satellite Pictures Of Chinese Ghost Cities >
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