In Depth: How One Chinese Province Is Struggling to Deal With Its Debt Mountain

Southwest China’s Guizhou province is renowned as the home of iconic liquor maker Kweichow Moutai Co. Ltd. (600519.SH), the most valuable company on the Shanghai stock exchange. But it’s also renowned for being one of the poorest provinces in the country, and one of the most heavily indebted.

In December 2019, the cash-strapped government received a generous and controversial present from Kweichow Moutai, which is controlled by the province’s state-owned assets watchdog. The company handed over 50.2 million shares, worth 57 billion yuan ($8.9 billion) at the time, which market participants said aimed to help the authority repay its borrowings and demonstrated how local governments could leverage their assets to clean up their debts.