Some of China’s most indebted regions have set conservative economic growth targets for 2024 after being told to focus on defusing the debt bomb, adding to the headwinds that are set to haunt the world’s second-largest economy this year.
The northern municipality of Tianjin, located 100 kilometers east of Beijing, announced a 4.5 percent GDP growth target on Tuesday, after reporting a subpar expansion of 4.3 percent year-on-year for 2023.
Tianjin, which has relied on debt to finance massive infrastructure projects to support growth, owed 864.5 billion yuan at the end of 2022, according to Guangzhou-based Yukai Securities.
“Growth is nothing to write home about”: 7 takeaways from Chinese economic data
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But its total fiscal revenue in 2022, including transfer payments from the central government, was less than 300 billion yuan.
Tianjin’s fixed asset investment fell 16.4 percent year on year in 2023, as officials rushed to complete a debt reduction plan.
Beijing has tasked heavily indebted localities to restructure their debts and curb spending, as local governments face declining revenues and a protracted contraction in the real estate sector.
China seeks ‘economic strength on the road’ with trillion yuan debt plan
China seeks ‘economic strength on the road’ with trillion yuan debt plan
Beijing has allowed local governments to issue special refinancing bonds to avoid default, while the central government has taken advantage of its low debt ratio to increase its transfer payments.
With the mountain of local debt considered among the main threats to China’s financial and economic stability, the Ministry of Finance said local governments owed 40.6 trillion yuan at the end of November.
However, there may be more implicit obligations hidden in local government financing instruments, state-owned enterprises, and PPP projects.
The southwestern province of Yunnan, which saw its debt rise to 1.2 trillion yuan in 2022, recorded growth of 4.4 percent in 2023. The agricultural province has set a target of about 5 percent for this year.
Guizhou, a southern province known for its large number of underutilized roads and other debt-financed infrastructure, also underperformed with GDP growth of 4.9 percent last year. It set a target of 5.5 percent for 2024.
The northeastern region of Heilongjiang recorded weak growth of 2.6 percent last year, but is also targeting 5.5 percent growth in 2024 amid rising tourism revenues.
Beijing has pinned its hopes on major economic powers, including Guangdong, Jiangsu and Zhejiang, to achieve higher growth this year.