Vir­tu­ally all pro­vin­cial-level re­gions re­port first-quar­ter slow­down

China Daily (Canada) - - FRONT PAGE - By ZHENG YANGPENG zhengyang­peng@ chi­

The east coast ex­port pow­er­house of Zhe­jiang was the only pro­vin­cial-level re­gion in China to achieve higher growth in the first quar­ter, when re­source pro­duc­ers and heavy industrial bases were hit hard by tough busi­ness con­di­tions.

As of last Fri­day, all 31 re­gional gov­ern­ments in the Chi­nese main­land had re­leased first-quar­ter GDP growth data. Ex­pan­sion slowed in 30 re­gions from that of last year, a com­pi­la­tion by China Daily showed.

The sharpest drop oc­curred in Liaon­ing prov­ince, where growth­slumpedby3.9per­cent­age points to 1.9 per­cent. Yearonex­pan­sion was also the slow­est among all re­gions.

The sec­ond-largest fall was in Hainan prov­ince (down 3.8 per­cent­age points) and the Xin­jiang Uygur au­ton­o­mous re­gion (down 3.1 per­cent­age points).

In Zhe­jiang, how­ever, growth ac­cel­er­ated to 8.2 per­cent from 7.6 per­cent.

On a na­tional ba­sis, GDP growth fur­ther slowed to a sixyear low of 7 per­cent, down from 7.3 per­cent growth in the fourth quar­ter of 2014.

Core sec­tors in var­i­ous re­gions determined each one’s over­all per­for­mance.

Re­source pro­duc­ers and heavy industrial bases were hit hard by slid­ing pro­ducer prices, which have been de­clin­ing for more than three years. The na­tional Pro­ducer Price In­dex fell 4.6 per­cent year-on-year in March alone, the 37th straight month of decline.

Liaon­ing, a man­u­fac­tur­ing strong­hold that grew rapidly in pre­vi­ous years, saw its growth plunge as in­dus­tries grap­pled with a ca­pac­ity glut and in­vest­ment tum­bled.

Steel, ce­ment and iron ore out­put fell in the first quar­ter for the first time in years. As a re­sult, industrial out­put con­tracted 5.9 per­cent. With a glut of un­sold hous­ing, prop­erty de­vel­op­ers slashed in­vest­ment. As a re­sult, to­tal in­vest­ment tum­bled 18.5 per­cent, whereas a year ear­lier it ex­panded 17.2 per­cent.

Un­der­scor­ing the sever­ity of the slow­down, Pre­mier Li Ke­qiang vis­ited Jilin prov­ince on April 10 and con­vened lead­ers from the three north­east prov­inces to dis­cuss the sit­u­a­tion. Lead­ers of the top eco­nomic plan­ner, the Na­tional Devel­op­ment and Re­form Com­mis­sion, vis­ited Liaon­ing in lateMarch.

Ma­jor coal pro­ducer Shanxi prov­ince’s prob­lems showed no sign of eas­ing, with GDP growth slow­ing fur­ther to 2.5 per­cent from 4.9 per­cent a year ear­lier. The prov­ince was crip­pled by fall­ing coal prices and the ex­po­sure of wide­spread cor­rup­tion that the Chi­nese me­dia have termed a “cor­rup­tion land­slide”.

“It lays bare the short­com­ings of the tra­di­tional growth model,” said Liu Qiao, a pro­fes­sor of fi­nance at the Guanghua School of Man­age­ment at Pek­ing Uni­ver­sity. He said lead­ers of th­ese re­gions should re­flect on their tra­di­tional ap­proach, pa­tiently seek new growth sources and re­frain from pump-prim­ing via big in­fra­struc­ture projects.

The ef­fect of the slow­down was very ev­i­dent in lo­cal gov­ern­ments’ fis­cal rev­enue. Gen­eral fis­cal rev­enue at the lo­cal level just grew 4.9 per­cent in the first quar­ter, the slow­est rate since 1994. Rev­enue from land sales, a pil­lar of lo­cal gov­ern­ments’ in­come, slumped 36.1 per­cent.

In fur­ther ev­i­dence of grow­ing con­cern over pro­vin­cial bud­gets, the Min­istry of Fi­nance on Tues­day warned in a cir­cu­lar of slow­ing tax rev­enue growth.

It also told lo­cal au­thor­i­ties to has­ten is­sues of mu­nic­i­pal bonds, a newly ap­proved source of bor­row­ing.

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