The Guanyinxia forest stretches up to the mountains north-west of Chongqing city in central China. Most is protected land. “Our purpose is mainly preservation, not to make money,” says Liu Siyang, party secretary of the government bureau that manages the forest.
Yet the same forest has a double life in the commercial world. It has been used as collateral by a company controlled by the local government forestry bureau to help secure a Rmb300m loan it took out last year from a state-owned bank, which was then spent on infrastructure projects in Chongqing.
It is deals like this that are leading analysts to look more closely at local government finances in China. Some are beginning to warn that not only is China's debt position much worse than advertised but that the banking system could also be heading for a large problem if many of these loans turn sour.