China’s debt-saddled regions owe far more than they can pay back without Beijing’s help

Several provinces and municipalities in China are grappling with significant debt issues. They have accumulated such high levels of debt that they are unable to repay them without assistance from the central government in Beijing. These regions are currently facing economic challenges as they lack clear strategies to restructure or reduce their debt. This has resulted in a slowdown in investment and economic growth. Tianjin, one of the four municipalities directly administered by the central government, experienced a decline in its fixed-asset investment by over 20 per cent in the first three quarters of 2023, compared to the same period in the previous year. This has led to a decrease in its gross domestic product (GDP) growth rate, which fell below the national average.

The city's investment in property development in the first nine months of the year also decreased significantly, almost halving compared to the same period in the previous year. This indicates a reduction in fiscal revenue, including from land sales, as fewer people are purchasing homes. The city's infrastructure investment, typically spearheaded by the government, also fell by 12. 6 per cent during this period. By the end of 2022, the total debt owed by Tianjin's government amounted to 864. 55 billion yuan (US$118 billion), as reported by Guangdong-based Yuekai Securities. However, Tianjin's total fiscal revenue, including transfer payments from the central government, was less than 300 billion yuan in the previous year.

Guizhou, a poverty-stricken province in southern China that has historically accumulated debt to stimulate investment and the local economy, also experienced a slowdown in its GDP growth rate, falling behind the national average. The province's investment in the property sector decreased by 16. 5 per cent during this period. In 2022, Guizhou's total government debt was 1. 247 trillion yuan, compared to its fiscal strength of 760 billion yuan. Yunnan, another province with substantial debt, recorded a year-on-year GDP growth of 4. 4 per cent from January to September. Its fixed-asset investment decreased by 8. 8 per cent. The province's total debt in 2022 was 1. 2 trillion yuan, approximately 500 billion higher than its fiscal income that year.