CHONGQING

CHONGQING: AN ILLUSTRATION OF CHINA'S UNSUSTAINABLE GROWTH MODEL

Also Sprach

Business Insider,April 17, 2012

The topic of corruption and purging of Bo Xilai were touched on briefly earlier, as I started to connect the dots. So corruption is part of China’s life, and it somehow contributes to the increase in debt and over-investment, which is, of course, financed by debts.

After Bo Xilai was purged and as new people will be running Chongqing government, the new Chongqing government decides to review the debts outstanding for the government, including the local government financing vehicles (LGFVs) debts, which are used in funding many of the infrastructure projects.

Bank of America Merrill Lynch came out with a note yesterday and made a very nice summary to illustrate the point of how the fastest growing region in China was growing via unsustainable level of borrowing that funds the over-investment:

Chongqing is reviewing its local government debt levels

The new leadership of Chongqing local government has reportedly required CQ LGFVs and SOEs to report local government investment projects and BT (Build-Transfer) financing projects. There are increasing concerns with respect to the mounting debts of CQ government, esp. at county and district levels. The new government is reportedly considering correcting its growth model to be less aggressive and to focus more on steady growth.

(...) [artículo aquí]