to a tsunami of municipal, county and city level defaults, that would leave China in ashes. Ironically, Meredith Whitney may have had the municipal default theme right. She was just envisioning the wrong continent... After three decades of spectacular growth, Guangdong's boom town of Dongguan is on the brink of bankruptcy . Up to 60 per cent of its villages are running up deficits and will soon need a bailout from the township , researchers at Sun Yat-sen University have discovered. It is a dramatic turn of fortune for Dongguan - one of the richest cities in China - and could foreshadow a wider fiscal crisis as the country's economy cools. Local government debt hit 10.7 trillion yuan (HK$13.16 trillion) nationwide at the end of 2010, equivalent to about 27 per cent of gross domestic product . Credit rating service Moody's estimates the actual figure could be about 14.2 trillion yuan . Bai Jingming, a senior researcher at the Ministry of Finance, estimated in 2009 the total debt of village authorities could total 10 per cent of the country's GDP, but there is no official data . Bai said many village chiefs he interviewed had no idea how much debt they had. Yet their failings could bring serious political and financial instability at higher level government right down to the grass roots. Experts have found Dongguan's village debt woes stem from two factors: a tightly-bound landlord economy, plunged into crisis by failing factories in the global downturn, and political pressure