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April 23, 2012

Chongqing a city of fast growth and high debt

WSJ - Chongqing is at the center of experiments in a more inclusive approach to development.

Chongqing is piloting innovations in property rights for farmers, and allowing rural migrants to access the urban pension, education, and health-care system. If successful, these experiments could catalyze a shift to more consumption-led growth, analysts say, because creating a path for China's huge rural population to participate in the prosperity and opportunities of urban life is the surest way to raise incomes.

Chongqing's innovations in social policy, like its debt-fueled growth, are deeply associated with Mr. Bo. Whether they survive his exit remains to be seen. At the Chongqing Academy of Social Science, Mr. Wang thinks the pace of development might come down a notch. "The new leaders say we can become a 'moderately prosperous society' "—an official target set by the government—by 2017, he said, two years behind the target set by Mr. Bo. "Mr. Bo was a bit too eager to succeed," he added.

A moderately prosperous society has been mentioned in China's planning as a GDP of US$10,000 per capita. This would mean a national GDP of $14 trillion.




"I don't think it would be a stretch to say that Chongqing local government, state-owned enterprises and state-owned developers collectively owed 1 trillion yuan at the end of 2011," says Victor Shih, an expert on China's local-government debt at Northwestern University. That estimate, based on Mr. Shih's own look through the records of Chongqing's financing vehicles, would put local-government debt in Chongqing at 100% of gross regional product, far higher than the 22% level for China as a whole, according to numbers from China's national audit office.

Chongqing, a smoggy city straddling the Yangtze and Jialing rivers, isn't the only Chinese city to take on heavy debt to build roads and other infrastructure in a bid to energize growth.


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