A county in East China's Anhui province cancelled a 15 million yuan ($2.35 million) subsidy for a local hotel after it caused controversy.

According to a policy approved by the government of Taihe county in 2009, local five-star hotels were entitled to receive subsidies of 10 to 20 million yuan, while a four-star hotel could receive 5 to 15 million yuan.

The Anhui Jinggong Hotel was recognized by the provincial tourism authority as a four-star hotel in December 2011. In June, the local government decided to grant a 15 million yuan subsidy to the hotel.

Liu Xinjie, a local senior commercial official, was quoted by Xinhua News Agency as saying that the policy was released because the county lacked high-standard hotels and that it was an encouragement for private investment in the local tourism sector.

Liu said the hotel applied for the subsidy after being recognized as a four-star hotel.

"Investors wouldn't have built high-standard hotels without the subsidies," he said.

Xu Hui, another senior local official admitted that the government "made a mistake by not allowing enough public participation in the decision-making process".

Zhu Lijia, a professor at the Chinese Academy of Governance, was quoted as saying by Xinhua that the ability of local governments to attract investment has become a key gauge of local government's achievements. He said that a new evaluation system should be put in place.

He added that the public opinion should be fully considered before local governments make big investment decisions and also that local governments should be cautious with public money.