Chinese county hosting the Olympics in red after investing binge

The Chinese region, which is one of the three main hubs for the Winter Olympics in Beijing this week, is facing serious financial problems after embarking on a debt-driven investment trip to prepare for the Games.

In a microcosm of the problems facing local governments in China, Chongli County has also been hit by Beijing’s repression of real estate credit combined with the loss of business from harsh pandemic prevention measures aimed at eliminating Covid-19.

“The Olympics have given us a hard blow,” said Daniel Li, who runs a ski equipment store near Genting Snow Park, one of the Winter Olympic stadiums. Li, who left Chongli County this month to seek work, is struggling to pay the annual rent of 200,000 Rmb ($ 31,443) for his ski equipment store, after China’s zero-Covid measures led to the closure of resorts from January to March.

“The ski season, on which we depend for a living, has come to an early end because of government policy and we have not received any compensation for our victims.”

Like many Olympic host cities and regions, Chongli and its administrative center Zhangjiakou embarked on a construction trip that filled the former agricultural region – known for its parts of the Great Wall of China – with five-star hotels, restaurants and conference facilities.

After Beijing launched its bid for the Winter Olympics with Chongli in 2013, the county’s annual tax spending more than tripled to a peak of $ 3.6 billion. Rmb in 2019, led by investments in sports-related facilities. On the other hand, tax revenues increased by less than two thirds to Rmb572 million. in the same period.

Li Jiang, head of the Chongli Finance Bureau, said in a speech last November that the county was facing a “huge” lack of funding for Olympic-related projects. Higher levels of government had not yet reimbursed Chongli for his advance payments on these activities. “These problems require … an immediate solution,” Li said.

Liang Baoku, director of the Chongli Development and Reform Bureau, the county’s economic planning agency, said in October that it had unveiled ski tourism projects worth a total of $ 37 billion. Rmb, since Beijing won the offer to host the Winter Olympics in 2015. That compared to 2.5 billion. Rmb. in the previous 15 years.

Zhangjiakou has reported one of the country’s fastest growing government gross domestic product in terms of debt ratios, which according to public records has jumped from 30 percent in 2018 to 48 percent in 2020.

“It is a general rule that the Olympics will have a negative impact on the economy of the host country,” said Dan Wang, chief economist at Hang Seng Bank (China). “This may be especially the case for China, where political considerations are prioritized over economic ones.”

Chongli’s house prices skyrocketed after Beijing won its bid for the Olympics, but a series of political repression, starting with restrictions on home purchases by outsiders in the county, quickly cooled the market. The final blow was Beijing’s efforts to tighten controls on the real estate sector’s borrowing, which has triggered a nationwide downturn in real estate.

Average prices for built homes in Chongli have fallen by more than a third over the past four years, according to Anjuke, a real estate website.

This has hit the county’s revenue from land sales, which missed the government’s target of 22 percent by 2020.

The economic downturn and pandemic restrictions have been devastating to jobs in the region. Several ski executives said revenue fell more than half in 2020 before turning to pre-pandemic levels last year and then falling again in 2022.

“There is no end in sight,” said a leader at a large Chongli ski resort.

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