Caixin
Aug 01, 2018 08:37 PM
FINANCE

China’s Paper City Could Become a House of Cards

A Chinese credit ratings agency has warned it may cut the ratings on a $177 million bond issued by the city of Leiyang’s local government financing vehicles. Photo: VCG
A Chinese credit ratings agency has warned it may cut the ratings on a $177 million bond issued by the city of Leiyang’s local government financing vehicles. Photo: VCG

Leiyang has been known for centuries in China as “Paper City,” the hometown of Cai Lun, the inventor of papermaking technology. In modern times it built a reputation as a major coal producer, and at its peak was one of the country’s top 100 coal-mining counties.

But now, Leiyang is gaining fame for a less auspicious reason — the state of the local government’s finances. The county-level city in the central province of Hunan hit the headlines in June after admitting it didn’t have enough money to pay the salaries of its civil servants in May because of a sharp decline in revenue from the real estate and coal industries.

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