Some of China’s most indebted regions have set modest economic growth targets for 2024 after being told to focus on defusing the debt bomb, leaving the world’s second-largest economy The headwinds that have plagued us this year will become even stronger.
The northern municipality of Tianjin, 100 kilometers (62 miles) east of Beijing, said on Tuesday it would grow 4.5% in 2023, after reporting gross domestic product (GDP) growth would be lower than 4.3% from a year earlier. announced the goal.
Tianjin relies on debt to finance large-scale infrastructure projects to fuel growth, with 864.5 billion yuan in debt at the end of 2022, according to Guangzhou-based Yuekai Securities.
“Growth is nothing special”: 7 points to glean from China’s economic data
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However, total fiscal revenue in 2022, including remittances from the central government, was less than 300 billion yuan.
Fixed asset investment in Tianjin fell by 16.4% year-on-year in 2023 as authorities rush to achieve debt reduction plans.
The Chinese government has mandated debt-ridden provinces to restructure their debt and rein in spending as local governments grapple with declining revenues and a prolonged downturn in the real estate sector.
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China aims for economic ‘future strength’ with 1 trillion yuan debt plan
The Chinese government has allowed local governments to issue special refinancing bonds to avoid defaults, while the central government has taken advantage of low debt ratios to increase transfer payments.
With the mountain of local debt considered one of the main threats to China’s fiscal and economic stability, the Ministry of Finance announced that local governments had 40.6 trillion yuan in debt as of the end of November.
But local government financing vehicles (LGFVs), state-owned enterprises, and public-private partnership projects can hide even more implicit debt.
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China’s GDP: Beijing’s long to-do list for economic growth in 2024
Yunnan province in the southwest, whose debt rose to 1.2 trillion yuan in 2022, recorded a growth rate of 4.4% in 2023. The province, which is an agricultural region, has set a target of about 5% this year.
The southern province of Guizhou, known for its large number of unused roads and other infrastructure financed by debt, also posted a weak GDP growth rate of 4.9% last year. It has set a target of 5.5% in 2024.
The remote region in northeastern Heilongjiang province recorded a dismal 2.6% growth last year, but is targeting 5.5% growth in 2024 as tourism revenue increases.
The Chinese government is pinning its hopes on major economic powerhouses such as Guangdong, Jiangsu and Zhejiang to achieve higher growth this year.