China’s Richest Regions Saw Boost From Stocks Boom Last Quarter

China’s diverse regions saw the impact of another differentiator to growth this year as an equities boom - - which has since soured -- provided a boost to some of its richest provinces.

Guangdong, Beijing and Shanghai, which account for the biggest chunks of China’s household equity ownership, received boosts from their sizable financial services sectors in the second quarter, regional economic data show. Their gains contributed to an improvement in growth seen in the majority of Chinese provinces even as the country’s economic expansion held steady, according to data compiled by Bloomberg News.

Here’s how China’s economic and market booms and busts are playing out among its provincial regions and cities, highlighting the challenge for policy makers in formulating a national strategy for the world’s biggest developing economy.

* Mind the Gap

At least 27 of 31 Chinese provinces and municipalities have released their gross domestic output figures for the first six months of this year. Of these, more than 20 saw growth accelerate last quarter, data from local statistical authorities and state newspapers showed.

Yet the best-performing region at the provincial-level grew more than four times faster than the weakest one: Chongqing expanded 11 percent in the first half from a year earlier, compared with Liaoning’s 2.6 percent.

“China is a very diverse economy, and some provinces may be more dependent on a certain sector,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “This will definitely add difficulty to policy making.”

A unified monetary policy is difficult to apply when regions have such big differences in growth, he said.

* Stocks Windfall

Shanghai, where the country’s major exchange and some of the largest brokerages are located, saw its financial-sector output surge more than 30 percent in the six months to June from a year earlier. That helped GDP expand 7 percent in first half, up from 6.6 percent in the January to March quarter.

Growth also quickened in Beijing and Guangdong, home to Shenzhen, the wealthiest municipality in the nation by per capita GDP and the place where some of the country’s smaller and advanced-technology companies are listed.

In the capital Beijing, where most state banks are headquartered, the financial industry accounted for 19.2 percent of the economy in the first six months. Its financial services increased 19.4 percent from a year earlier.

Of the 7.7 percent growth in southern export hub Guangdong, 1.4 percentage point came from financial services. That sector jumped 23 percent from a year earlier in the first half, "driven by the rapid rally of the stock market," according to the local statistics authority. While the province’s expansion was constrained by faltering exports and rising labor costs, services surged 52.8 percent.

* Patchy Property Recovery

In Hainan, the southern island where tourism and real estate are key sectors, recovering property sales are an “important sustaining power of the accelerated pickup in the second quarter,” its government said.

The island province saw the fastest acceleration in the nation as GDP grew 7.6 percent in the first half from a year earlier, from 4.7 percent in the three months to March.

Investment in real-estate development rose 16.1 percent in Guangdong from January to June, even as the national rate slowed to 4.6 percent. Value-added in the property sector contributed 0.6 percentage point to the province’s growth.

In contrast, the northeastern industrial base of Liaoning had the slowest economic growth among provinces in the first half, with property investment dropping 24.1 percent in the first five months from a year earlier. Neighboring Heilongjiang experienced a 16.8 percent decrease in the measure, while resource-dependent Inner Mongolia saw a 24.5 percent decline.

* Heavy Industries Suffer

The economy in Heilongjiang, on the Russian border, expanded 4.8 percent in the six months to June from a year earlier, unchanged from the first quarter and among the weakest in the country.

Overcapacity in several sectors and lack of competitiveness at local industrial companies have led to severe problems and downward pressure is mounting, according to the provincial government.

Liaoning also said its difficulties are “acute” as industrial-growth targets are hard to achieve and pressure mounts on investment, according to the provincial statistics bureau. Both provinces are traditional heavy industry bases.

* The Outperformers

Southwest regions Chongqing and Guizhou kept their above-10 percent GDP growth rates. Tianjin, the top performer from 2010 to 2012, grew 9.4 percent in the first half from a year earlier.

Chongqing posted an 11 percent jump from January to June. The municipality’s industrial output rose 10.8 percent and fixed-asset investment surged 17.5 percent. Guizhou reported higher industrial output, transportation investment and credit.

And a former star to watch: Inner Mongolia, which registered the strongest GDP expansion in 2009 at almost 17 percent, grew 7 percent in the first quarter to rank 19th out of 31 regions. The autonomous region hasn’t released its first-half figure.

— With assistance by Xiaoqing Pi

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