China’s economic development gap is widening with tougher times looming after more than half of its provinces missed their economic growth targets last year and the effects of the trade war with the US taking a toll on the domestic economy.
Seventeen of 31 Chinese provincial-level divisions failed to meet their gross domestic product growth rate goals in a year where the national economy expanded at 6.6 per cent, its slowest pace in 28 years, according to a review of local annual economic reports by the South China Morning Post.
Chongqing, once the nation’s fastest growing region, was its worst performer last year. The 2018 growth rate of the inland manufacturing powerhouse slumped to 6.0 per cent from the previous 9.3 per cent, and was 2.5 percentage points behind the targeted 8.5 per cent set at start of the year.
China’s most prosperous province Guangdong also missed its 7 per cent target. The export base’s economic growth rate slowed by 0.7 percentage point to 6.8 per cent last year.
Similarly, GDP growth of Jiangsu, one of China’s private economy heartlands, weakened to 6.7 per cent, which fell behind its above 7 per cent goal, even as Beijing ratcheted up efforts to support the private sector to buffer the slowdown and mounting jobless fears.
“Chinese provincial-authorities performed worse than expected in meeting their growth targets in 2018,” Guosheng Securities analyst Xiong Yuan wrote in a recent note. “Apart from Shandong province, the real GDP growth rates of the other 30 provinces were on average, 0.3 percentage point lower than their targets.”
“The economic downturn pressure of China has become more significant,” Xiong wrote.
What has also become more evident from the data was the widening gap among the richest provinces, compared with the previous discrepancy that was primarily between the coastal and landlocked regions.
With an annual GDP of 7.65 trillion yuan (US$1.13 trillion), eastern Shandong province retained its spot as the third-largest economy among 31 Chinese provincial-level jurisdictions in 2018. However, the gaps with the top two provinces – Guangdong and Jiangsu – were 370 billion and 290 billion yuan larger respectively, compared with 2017.
The economic downturn pressure of China has become more significant
Xiong Yuan, Guosheng Securities
The additional layer of growth discrepancy underscored the complexity of economic restructuring plaguing the world’s second-largest economy. China’s northern and northeastern provinces, once the heart of the country’s state-owned industries and enterprises, now not only rank at the bottom of the list, but are also struggling to upgrade the value chain, overcome a brain drain and statistical frauds.
In contrast, the remote and hilly southwestern provinces, including Sichuan, Guizhou, Yunnan and Tibet, posted the fastest expansion pace last year, from a lower growth base and investment-oriented development practices.
Nonetheless, their growth rate have also slowed or stagnated, along with the 22 other provinces.
The autonomous region of Tibet remained at the bottom of the list last year with an annual GDP of just 140 billion yuan. It pulled further away from its gap with financial centre Shanghai by 3.13 trillion yuan, compared with 2.88 trillion yuan in 2017.
Beijing is banking on building up a “powerful home market” to spur the economic growth, but fragmented regional economies could thwart its efforts of efficiently stimulating domestic demand.
In November, the State Council, China’s cabinet, published a document to better coordinate and rebalance regional development, with the aim to improve infrastructure and financial support for underdeveloped regions.
“The move is all about regional economic restructuring and rebalancing,” the Trivium consultancy said in a note then.
“If policymakers can succeed in getting it more joined up, it will be a major boon for macroeconomic efficiency and growth,” the note said.