Almost all Chinese provinces failed to meet their growth targets in the first quarter even after scaling back their ambitions as the government instructs officials to focus on reining in debt and curbing pollution.
Thirty of 31 provinces and municipalities reported missing their goals, with the biggest shortfall in northeastern Heilongjiang, where an expansion of 4.1 percent compared with an 8.5 percent target for the year. Most localities’ targets are lower than in 2013. The latest data were released by government websites and newspapers.
Premier Li Keqiang risks the nation sliding into a deeper slowdown as the government cracks down on overcapacity in the steel industry, wrestles with shadow banking risks and rolls out economic restructuring measures. While the government has supported expansion with steps such as reserve-ratio cuts for rural banks, it has so far avoided broader stimulus as Li chases a national growth target of about 7.5 percent.
“The central government will continue to refrain from all-out stimulus and the slowdown pressure may continue to rise,” said Zhu Haibin, the chief China economist with JPMorgan Chase & Co. in Hong Kong. After a 7.4 percent expansion in the first quarter, growth may sink closer to 7 percent during the second half of this year, Zhu said.
The Shanghai Composite Index rose 0.2 percent as of the morning break in trading, paring this year’s decline to about 5.2 percent.
Six provinces missed their goals by more than 3 percentage points. In Hebei, where the government is cutting steel capacity, growth was 4.2 percent, compared with a target of 8 percent. The province surrounding Beijing is the country’s biggest steelmaker, accounting for about a quarter of national output last year, and its cities are shrouded in smog.
The world’s second-biggest economy is going through “a difficult period of adjustment,” former central bank adviser Li Daokui said in Beijing on April 27. The government will stabilize growth in the second half, including by speeding economic changes to allow more private investment, Li said.
In Shanxi, a region hit by slumping coal prices and mine closures, an expansion of 5.5 percent compared with a full-year target of 9 percent. Heilongjiang, Hebei and Shanxi are “all provinces which suffer relatively severe overcapacity,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong.
JPMorgan’s Zhu said provincial goals remain “too high” and that all provinces except Beijing and Shanghai had targeted growth above 7.5 percent.
“The GDP target is no longer the only thing that matters,” said Zhu. “But missing the targets too much will certainly put heavy pressure on local governments to stabilize growth.”
The latest numbers indicate that a divergence between local and national data is narrowing. The total of local numbers for nominal first-quarter gross domestic product was 3.7 percent higher than the national figure. That compares with an excess of almost 11 percent in 2013.
Regions have an incentive to avoid inflating growth figures now that officials are being judged on an array of issues including debt and the environment, not only gross domestic product.
Local-government borrowing will be an “important indicator” in regional officials’ performance reviews and people should be punished for decisions that “result in huge losses to the country,” waste resources or cause ecological damage, the official Xinhua News Agency reported in December, citing the Communist Party’s Organization Department.
“Most important is the environment,” said Hou Liang, the mayor of Zhangjiakou, a city in Hebei, as he came out of a regional session of the National People’s Congress in Beijing in March. “We no longer rely on gross domestic product as in the past, yet dealing with the environment is much tougher.”
China’s expansion moderated to the weakest pace in six quarters in the first three months of the year as property construction plunged. Developer China Vanke Co. yesterday reported a decline in profit.
The eastern inland province of Anhui reported a 9.6 percent economic expansion in the first quarter, exceeding a goal of 9.5 percent for the year -- the sole region to beat its target. Guangdong, the biggest provincial economy and a hub for exports, reported growth of 7.2 percent in the first quarter, compared with a target of 8.5 percent.
The gap in reported economic output between provinces and national statistics narrowed for the first time in six years in 2013. The combined nominal economic output of the 31 provinces expanded about 9.2 percent to 62.9 trillion yuan ($10 trillion), according to data reported by local governments and compiled by Bloomberg News in February. That exceeded the national figure by 6.06 trillion yuan, or 10.7 percent, after an 11 percent margin in 2012.