August 29, 2017 / 11:58 AM / a year ago

Fitch: Chinese Regions Show Wide Economic, Fiscal Disparities

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: China Local Government Blue Book here SHANGHAI, August 29 (Fitch) The coastal regions in China remain the strongest among 30 of the country's provinces, municipalities and autonomous regions, underpinned by their sizeable economies, fiscal revenue diversification and relatively low fiscal deficit to GDP ratios, a Fitch Ratings cross-dimensional analysis of the regions showed. The findings underscore the wide economic, fiscal, and demographic disparities across regions. The coastal regions led in GDP per capita in 2016, with Tianjin, Beijing and Shanghai ranked as the top three. Coal-rich Inner Mongolia and Shanxi also have relatively strong GDP per capita, while the south-western and north-western regions and Heilongjiang have GDP per capita that are below the national average. The coastal regions have the highest consumption-to-GDP ratios that were close to or above 40%, as well as the highest GDP contribution from tertiary industries. In comparison, Jilin, Inner Mongolia, and the north-western regions remained dependent on investments, which accounted for over 60% of their local GDP. China has set a fixed-asset investment (FAI) growth target of 9% in 2017, up from actual 7.9% (8.6% in real terms) in 2016. Local governments are more conservative, with only 10 out of the 27 regions that have disclosed 2017 FAI growth targets aiming for acceleration. South-western and inland regions, such as Guizhou, Yunnan, Jiangxi, Hunan and Henan, led FAI growth in 2016 and are likely to continue to do so in 2017 to address infrastructure inadequacy and stimulate economic growth. The 30 regions had a median fiscal deficit-to-GDP ratio of 13% in 2016. The coastal regions reported fiscal deficit-to-GDP ratios that were well below the median, while the north-western and south-western regions have high fiscal deficits relative to GDP. Chinese local governments generate a median of around 40% of fiscal revenue from real estate. Chongqing and Hainan ranked in the top two, with more than half of their fiscal revenue sourced from real estate in 2015. Tianjin had the lowest percentage of fiscal revenue from real estate among all municipalities, with Beijing and Shanghai tracking around the median level. Most provincial governments do not publicly disclose their indirect debt levels, that is, category two and three debt, which makes it difficult to assess their debt levels. Chinese local governments had an aggregate direct debt of CNY15.3 trillion (including CNY10.6 trillion of municipal bonds) at end-2016, representing 89% of the direct debt ceiling imposed by the Ministry of Finance, or 20.6% of GDP, down from 92% and 21.4% respectively at end-2015. Jiangsu, Shandong and Zhejiang were the three largest onshore local-government bond issuers in 2016. Liaoning, Guizhou, and Guangdong rank top three in terms of their planned municipal bond issuance under the debt swap programme in 2017-2019. The report covered 30 of the 31 mainland Chinese provinces, municipalities and autonomous regions; Tibet is excluded due to its small economic scale and lack of data. The full report, "Chinese Local Governments Blue Book - A Cross-Dimensional Analysis", is the latest in a series of Fitch China Research Initiative publications dedicated to providing comprehensive, in-depth research and insight into the key credit aspects of sectors in China. The full report is available at or by clicking on the link in this media release. Contact: Karl Shen Associate Director +86 21 5097 3008 Fitch Ratings (Beijing) Ltd. Shanghai Branch 3401, 34/F, Shanghai Tower, No.479, Lujiazuihuan Road, Pudong Shanghai 200120, China Shuncheng Zhang Associate Director +86 21 5097 3039 Jenny Huang Director +86 21 5097 3101 Ying Wang Senior Director +86 21 5097 3010 Terry Gao Senior Director +852 2263 9972 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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