As China’s economy splinters along provincial lines, nuanced policy becomes key
The leadership is trying to deliver measures tailored to the needs of different regions, such as the rust belt in the north and poorer regions in the far south
While the headline numbers from China have pointed to an overall stabilisation in the economy this year, and possibly even a pick-up in the past couple of months, fresh provincial data shows a splintering growth path that complicates the policy outlook.
Of the 29 of 31 provinces and municipalities to have published gross domestic product reports for the first quarter, 25 reported a slowdown from 2015’s full-year pace and 14 are undershooting their expansion targets. And the worst news may not even be out yet: two rust-belt provinces in the northeast – Liaoning and Heilongjiang – haven’t released their figures yet.
“Hope and challenges coexist” is how Premier Li Keqiang phrased it when speaking of the fracturing in growth at the nation’s annual legislative gathering in March. The provincial readings underscore the challenge for policymakers facing multiple and often conflicting goals, such as the need to cut capacity in the steel and coal industries without spurring pockets of mass unemployment; or boosting housing markets in smaller cities while applying the brakes on surging prices in megacities like Beijing, Shanghai and Shenzhen.
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The provincial slowdowns may also spur fresh questions over China’s 6.7 per cent expansion pace from a year earlier in the first three months of 2016, after quarter-to-quarter data suggested a slower pace. Here’s a look under the hood of the world’s second-largest economy.
A turnaround in the property sector led the first-quarter stabilisation as investment accelerated 6.2 per cent from a year earlier on stronger sales and surging prices in bigger cities. Yet housing remains a tale of two types of Chinese cities: the winners and losers.
Property investment surged 15.5 per cent from a year earlier in the provincial-level port city of Tianjin, jumped in Qinghai, a northwest region hit by poverty, and leaped ahead in Guangxi, a southern province bordering Vietnam. Shanghai’s local government said the property sector was “abnormally active”.
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The picture was different in Guizhou, a mountainous area in the south, where property investment dropped 7.6 per cent from a year earlier. In Chongqing, the former national growth champion that has switched focus to cutting excess capacity, it fell 2 per cent.