China’s most indebted provinces face further woes in 2020 as pressure to help slowing economy grows
- Qinghai, Guizhou and Hainan top the list of China’s most indebted provinces, in terms of debt-to-gross domestic product ratio, with debts of 1.3 trillion yuan in 2018
- As of the end of 2019, local governments in China had debts totaling 21.31 trillion yuan (US$3 trillion)
Under pressure to help boost the economy by spending on infrastructure despite increasingly having less money at their disposal, some of China’s most indebted provinces are set to find themselves in worse positions in 2020 as debts only continue to rise.
Local governments sold 4.36 trillion yuan (US$630 billion) of bonds last year, up about 6 per cent from 4.12 trillion yuan from 2018, the Ministry of Finance said on Wednesday, adding to the total outstanding local government debts of 21.31 trillion yuan (US$3 trillion) at the end of 2019.
Local governments paid 656.7 billion yuan (US$95 billion) in interest for 2019, while seeing their tax revenues slow to growth of just 3 per cent at 9.3 trillion billion yuan due to a nationwide tax cut aimed at boosting the economy.
Weak prospects within the property market mean there is also little appetite for real estate development, which can hurt local government income, of which 70 per cent comes from land sales, according to Rory Green, China economist at TS Lombard.
We expect local government revenue to come under increased pressure this year. The [Communist] Party wants provincial officials to do more but with less money.
