Lanxi county in Heilongjiang province forced its impoverished residents to loan the government 13 million yuan ($2 million) that it has failed to repay for 14 years.
More than 470,000 residents were told in 1995 that the money would be put towards a 21.9 km road to Zhaodong city.
Lanxi county government - which charged some people interest if they could not immediately afford the loan amount - said it would repay the cash in 1999.
The county government said it planned to use revenue collected from tollbooths on the new road to repay the money. However, the tollbooths on the road were decommissioned on May 1 this year and the government still has not repaid the money to its residents.
Furthermore, it has been revealed that the government has no money and no idea when it can honor the debt. It has been discussing repayment strategies for two-and-a-half years - with the latest meeting being yesterday afternoon - but it is still yet to formulate a plan.
"Lending money to the government turned out to be compulsory, even though the public was unwilling to do so", said Dong Zhanlin, a retired official, who has spent seven years campaigning on behalf of residents.
Dong told the China Youth Daily that based on his calculations of tollbooth revenue, the government would only have access to 200,000 yuan per year. This meant it would take at least 50 years to repay the money back, he said.
The road was partly funded by the provincial government and cost a total of 26.72 million yuan.
However, a 2005 report showed the county government believed it was more important to settle a 5 million yuan debt owed to the construction company before it repaid residents.
Lanxi county residents paid between 100-400 yuan and farmers contributed a total of more than 9 million yuan.
According to Dong, farmers that could not immediately afford to contribute were charged 130 yuan plus 52 yuan in interest to be repaid after selling their harvest.
He said 4,500 households in Changjiang village gave the government 575,000 yuan, and 80 percent were forced to take out the loan.
"They did not ask if I wanted to or not, I simply had deducted 240 yuan from my salary," said a 60-year-old gatekeeper working for the county's auditing bureau, who only identified himself as Huang.
Dong said he has sent numerous letters to the county on residents' behalf. However, the county replied that it had no money, did not know when the repayments could be made, but would not default on the loan, Dong said.
A county government official said a meeting to devise a repayment schedule was held yesterday. "Hopefully a real plan could come up soon."