China’s Ordos, the Chinese ghost city known for its empty skyscrapers is struggling to repay debt and has resorted to borrowing from companies to pay workers

July 8, 2013 Leave a comment

China’s Ordos Struggles to Repay Debt: Xinhua Magazine

A Chinese city known for its empty skyscrapers is struggling to repay debt and has resorted to borrowing from companies to pay workers, a magazine published by the official Xinhua News Agency reported. Some district governments of Ordos, Inner Mongolia, had to borrow money from companies to pay salaries of municipal employees, Economy & Nation Weekly said in a July 5 report on its website. Ordos local-government entities have amassed 240 billion yuan ($39 billion) of debt, while the city had 37.5 billion yuan of revenue last year, the publication said without specifying annual interest costs. The report adds to signs of strains in an economy that probably decelerated for a second straight quarter as overseas and domestic demand slowed and Premier Li Keqiang reined in credit growth. China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the country’s biggest shipyard outside state control, said last week it’s seeking financial support from the government after orders plunged. “Isolated default cases will happen in places like Ordos – – people know investment in these places is unsustainable,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong. Two phone calls to Ordos’s government general affairs office went unanswered. The city is also known as Erdos. Vice Finance Minister Zhu Guangyao said last week that China should be on “high alert” to risks in local government debt. Coal-rich Ordos is known for a building frenzy in recent years, including a new area named Kangbashi that was designed to accommodate 300,000 people.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

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