context: Village debt has gradually emerged as a challenge to rural revitalisation, creating economic and legal risks at the grassroots. Villages heavily in debt are hesitant to launch new construction projects, which are championed by the state to boost rural investment.
As of H1 2019, the total debt owed by 700,000 administrative villages across the country reached C¥900 bn, an average of about C¥1.3 million per village, according to MARA (Ministry of Agriculture and Rural Affairs).
A small part of the debt could be traced back to the era of ag tax, when small farmers who could not afford the tax tended to borrow money from the village, yet were unable to pay it back afterwards. A large chunk of the debt comes from the mass campaign to revitalise the countryside, says China Newsweek.
Construction projects were kickstarted nationwide, with the central government providing 30-60 percent of the project fund and villages managing to collect the rest. While some infrastructure projects, such as cleaning weirs and repairing channels, are welcomed by farmers, others like office buildings and rural plazas are now seen as unwanted prestige projects.
Villages in developed provinces also borrowed money to boost local business, for example by building industrial parks, some of which failed to create stable economic returns. Liabilities due to business development accounted for 63 percent of the total debt owed by 986 villages in Lishui city, Zhejiang province.
There is no sustainable solution for now. Some star villages can apply for new projects and use new funding to fill the gap. Poor villages without access to new funding have to seek help from agencies or companies with the political task of poverty alleviation. Some rely on land transfer fees or other transfer payments.