Guangdong warned over infrastructure spending
Analysts say indebted province's plans to invest 1.41 trillion yuan in infrastructure is dangerous
Guangdong's decision to invest 1.41 trillion yuan (HK$1.77 trillion) to beef up its infrastructure over the next three years has been described as dangerous by analysts, since the province is already knee-deep in debt.
"Infrastructure investment can drive economic growth, but it also creates problems," said Zheng Tianxiang, a transport professor at Sun Yat-sen University in Guangzhou.
"This form of economic growth is very dangerous. The Guangdong government realises it has a debt problem, but if there is no investment, there is no growth."
This form of economic growth is very dangerous. The Guangdong government realises it has a debt problem, but if there is no investment, there is no growth
The only way to drive Guangdong's economy was through infrastructure investment since exports to the United States and Europe, the mainstay of the province's economy, had weakened and domestic consumption was not growing fast enough, Zheng said.
"Corruption is inevitable in infrastructure investment. Some officials will prosper," he said.
Fitch Ratings this month cut the mainland's long-term local-currency debt rating to A-plus from AA-minus, on concerns over the country's ballooning debt.
In the next three years, Guangdong has budgeted an investment of 1.41 trillion yuan in 202 ongoing and 258 new transport infrastructure projects.
"Increasing infrastructure construction will speed up the development of northern, southern and western Guangdong and redress the regional imbalance in Guangdong's economy, while strengthening the economy of the Pearl River Delta," said Guangdong party secretary Hu Chunhua.