Most of China’s provinces said their economies accelerated in the second quarter, suggesting local leaders are sharpening their focus on growth.
Twenty-two of 27 provinces and provincial-level cities that have reported first-half expansion through today indicated a pickup, based on local-government data and state-media articles compiled by Bloomberg News. Nationwide, the first-half and first-quarter numbers were identical at 7.4 percent, while expansion was 0.1 percentage point faster in the second quarter.
The regions are benefiting from central-government stimulus including expedited railway spending and tax cuts while they lay out their own investment plans to support growth. Expansion accelerated even after the Communist Party said local officials would be evaluated on their ability to meet goals including controlling debt and pollution.
“Both the national and provincial figures show a clear pickup, though the provincial ones more obviously so,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing, who formerly worked at the World Bank. Local governments have long reported numbers higher than national figures, and “provincial governments still have the incentive to inflate the GDP figures,” he said.
Eight provinces reported first-half expansion that was at least a half percentage-point higher than the first-quarter figure.
Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said the “national figures are relatively more accurate” than the local numbers.
Thirty of 31 provinces previously reported first-quarter expansion that was below regional goals for 2014. Four provinces have yet to report first-half GDP, including Heilongjiang, which had the country’s weakest growth in the first quarter.
Two of the regions hardest-hit by slowdowns showed rebounds. Northern Hebei, where the government is cutting steelmaking capacity, grew 5.8 percent in January-to-June from a year earlier after 4.2 percent in the first three months, while coal-dependent Shanxi expanded 6.1 percent in the first half, compared with 5.5 percent in January-to-March.
Shanxi has seen the initial effects of measures to curb its slowdown, yet it still has an “arduous task to reach the average national level of full-year growth,” the province’s statistics bureau said on its website yesterday.
Other provinces reporting stronger second-quarter pickups than the central government include Tibet, with 11.7 percent growth in the first half after the initial quarter’s 9.2 percent; and Yunnan, which cited “important support” from big projects as expansion accelerated to 8.4 percent in January-to-June from 7.7 percent in the first quarter.
Anhui, the only region to exceed its target in January-to-March, is now trailing its 9.5 percent annual goal with first-half growth of 9.3 percent. The province’s expansion in fixed-asset investment, excluding rural households, slowed to 18 percent in the January-June period from 19.4 percent in the first quarter.
A report today suggested the economy is off to a faster start in the second half. The preliminary manufacturing Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics for July rose to 52.0 from June’s final reading of 50.7, with numbers above 50 indicating expansion.
China’s leaders are trying to change a system where growth was traditionally seen as the quickest path to promotion. Local-government borrowing will be an “important indicator” for officials’ performance reviews and people should be punished for decisions that result in losses, waste resources or cause ecological damage, the Xinhua News Agency reported in December, citing the Communist Party’s Organization Department.
The regional governments are outlining stimulus plans to shore up growth as central authorities limit aid to targeted areas such as agriculture and small businesses. Hebei will invest 1.2 trillion yuan ($194 billion) in areas including railways, energy and housing, while Heilongjiang in the northeast will spend more than 300 billion yuan over two years in areas including infrastructure and mining.
Growth in Hebei, Heilongjiang and Shanxi suffered the most from environmental-protection campaigns in the first quarter, and then the “factories started again” in the second quarter, said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong.
“The deciding factor on whether the economy will recover or slow is still investment,” said Zhu, who formerly worked at the Bank for International Settlements. Provincial-level measures to stabilize growth are “generally focusing on investment,” he said.
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