This report does not constitute a rating action.
SINGAPORE (S&P Global Ratings) Feb. 20, 2024--China's city governments exist in diverse fiscal circumstances, which suggest diverse approaches to unwinding debt and pursuing growth. To understand which governments are facing what conditions, S&P Global Ratings conducted a data comparison across 66 cities. We divide these governments into four quadrants and discuss the options available to city governments in each quadrant.
This is according to a chartbook-style commentary we published today, titled, "China City Governments Risk Falling Into A Debt Trap."
"We believe China's city governments face wide-ranging fiscal conditions," said S&P Global Ratings credit analyst Wenyin Huang. "The financing options open to the poorer, more indebted cities are narrowing. We believe further that it would be a mistake for these governments to use much more debt to stimulate their economies."
Key Takeaways
- China's city governments are taking divergent fiscal measures to address competing policy targets.
- The group of local governments with low income and a high debt level will face the most pressing need to cut spending and curtail debt risks, which may hurt growth.
- The group with low income and low debt may have higher economic potential.
- Key state-owned enterprises in low-income regions are experiencing strained financing conditions, prompting local governments to raise more funds directly through the issue of government bonds, rather than through the enterprises.
- High debt levels constrain local economies, and are not effective in lifting income per capita.
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| Primary Credit Analyst: | Wenyin Huang, Singapore +65 6216 1052; Wenyin.Huang@spglobal.com |
| Secondary Contacts: | Susan Chu, Hong Kong (852) 2912-3055; susan.chu@spglobal.com |
| Chen Guo, Hong Kong 25328063; chen.guo@spglobal.com | |
| Media Contacts: | Ning Ma, Hong Kong (852) 2912-3029; ning.ma@spglobal.com |
| Michelle Lei, Beijing + 86 10 6569 2961; michelle.lei@spglobal.com |
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