China Curbs Theme Park Projects

[GavG]

China has suspended the construction of large theme parks to clamp down on local government spending and rein in unauthorized real-estate development.

The country's top economic planning agency has halted the construction of locally approved parks planned to be larger than 20 hectares or that have a total investment of more than 500 million yuan (US$78 million), according to a directive seen Tuesday.

"Since 2004, the State Council [China's cabinet] has clearly ruled that it must approve construction of large-scale theme parks. But in recent years local governments have approved large parks on their own," the National Development and Reform Commission said in the directive.

The suspension took effect Aug. 5 and covers projects already approved but for which construction hasn't yet begun. It will remain in place until the introduction of new regulations for the sector, the directive said.

The suspension comes as Beijing is under growing pressure to clean up the huge amount of debt that local governments have accumulated through infrastructure projects since it launched massive fiscal stimulus in 2008 to combat the global financial crisis.

China's national audit office has estimated that local government debt totaled 10.7 trillion yuan at the end of December, equivalent to 27% of the country's 2010 gross domestic product. It is unclear how much of that debt is at risk of going bad.

The Ministry of Finance on Monday said any risks from local debt are generally controllable, but conceded that some authorities have a weaker capacity to repay their debt.

The planning agency also appears to be taking aim at theme parks that have been quietly turned into property projects by local developers.

"Some companies have undertaken property development projects under the name of developing theme parks," it said.

China has been trying to rein in property prices, which have been spiraling out of reach of many of China's 1.3 billion people, spurring criticism of the government.
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