Growth Targets in China Provinces Slashed as Rising Debt Concerns Reign

Almost half of China’s provinces are setting their growth sights lower in the wake of the central government’s emphasis on the quality of expansion over speed, a sign of an increased focus on tackling rising debt.

Fourteen provinces have set lower targets for gross domestic product expansion this year than in 2012 and the other 17 left their goals unchanged, according to Nomura Holdings Inc. The weighted average target has dropped to 9.9 percent from 10.3 percent, Citigroup Inc. calculates.

Scaling back regional politicians’ growth-at-any-cost attitudes may limit China’s rebound from its weakest expansion in 13 years. At the same time, it may mitigate concerns that rising local-government defaults will threaten the financial system and pollution will worsen as leaders complete a once-a- decade power handover next month.

“In the future, the central government may look at more indicators, including pollution and debt, in assessing local officials,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong and a former researcher for the International Monetary Fund. “You can’t continue the traditional way of accumulating heavy debts to push up GDP in your term and then leave the trouble to your successor.”


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