6 December 2019

Western China overreliant on investment and property for growth

Most of China’s administrative regions have released their economic performance data for the third quarter. While the importance of exports has noticeably gone down, local economies have become increasingly reliant on fixed asset investment to spur growth. With the central government mum on housing regulations recently, the property sector is bound to grow in significance.

A marked disparity has emerged between the economies of the eastern and western regions. The pace of economic expansion in traditional powerhouses along the coastal areas, which tend to rely more on exports, slowed down to single digits amid the renminbi’s appreciation. But most of the western regions were able to maintain double-digit growth rates.

Guizhou province reported a 12.6 percent surge in gross domestic product for the three months to September, Chongqing saw a 12.4 percent growth, while Yunnan province expanded 12.1 percent, topping the rest of the country, and all because of massive investments in these areas.

But a closer look at the investment-driven growth will show a growing risk. Take Guizhou for example. Fixed asset investment in the province in the first three quarters of 2013 jumped nearly 30 percent from a year ago, and was obviously spurred by a 42 percent spurt in real estate development during the period.

Overindulgence in property-led economic growth is unhealthy. This addiction to real estate can “hijack” the economy by crowding out other sectors in access to capital and depriving them of the chance to develop, China Business News quoted a researcher as saying.

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