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The economies of six Chineseprovinces will be as big as those of
Spain or Canada by 2020, according to a recent study from British
bank HSBC.
But the study also reveals dangers of what could be an
overheating national economy.
Those provinces, Hebei, Henan, Shandong, Jiangsu, Zhejiang and
Guangdong, are each estimated to have local GDPs over 1 trillion
yuan ($150.13 million) by 2020, according to the report.
China's dazzling economic growth, fueled by GDP-measured
performance and inter-regional competition, is expected to continue
for at least the next five years, the report stated.
The country has set a target of 8 percent for its GDP growth,
but actual growth might be higher than that.
Local governments have managed to beat Beijing's growth targets
by a few percentage points every year since 1980.
For the 2011 to 2015 period, provinces have far more ambitious
plans for the expansion of rail networks and clean-energy
activities than those stipulated by the national target, the report
stated.
One reason for this is that "to get promoted in China, you have
to outperform your peers."
But the increased competition and over-investment among the
local governments will most likely to lead to overcapacity in these
areas, and that could result in more bad debt.
The report cited the 1,000-plus-kilometer Wuhan-to-Guangzhou
bullet train as an example.
That line started operating earlier this year, but it is running
at less than half of capacity.
The report asserts that the project will never make enough money
to pay off the loans made to finance it.
As of June, local government debt amounted to 7.66 trillion yuan
($1.15 trillion), of which some 1.76 trillion yuan ($264.4 billion)
has been classified as bad debt, according to the China Banking
Regulatory Commission.
Strong regional GDP figures do not necessarily reflect the
economic reality on the ground, Cao Yin, a consultant with Frost
and Sullivan, told the Global Times.
Overly optimistic investments by local governments keen on
tapping into central government-supported projects, such as clean
energy, may result in huge waste, intense competition and
overcapacity in these sectors, Frost and Sullivan's Cao said.
China's policy often lacks predictability, scientific planning
and sustainability, he said.
Due to the low requirements for market entry, the photovoltaic
solar industry in China has suffered overcapacity problems, said
Adfaith Management analyst Fu Kun.
Source: Global Times
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