Chinese Local Governments Have 10 Trillion in Stimulus Planned, But No Way to Pay For It

An unofficial and informal count by Chinese media puts recently added mini-stimulus projects at ￥10 trillion. Now if only they could sell some land or borrow to pay for it.

Data puts local government investment projects at ￥14.7 trillion through May, an increase of 17.6% yoy, the slowest growth rate since 2002. Sichuan increased its planned projects by 40% in March to nearly ￥3 trillion. Guangdong, Tianjin, Hainan and 5 other municipalities and provinces announced ￥7 trillion in projects. Analysts say "mini-stimulus" is now an all-year round effort by local governments.

However, Stephen Green of Standard Chartered says "local governments dream big, but what they can do is limited." Lin Jiang, professor of Public Finance and Taxation at Lingnan University, says that unless the central government decides to do a "strong" stimulus, the mini-stimulus will stay mini.

媒体：各地刺激政策总规模超10万亿 钱从哪来成谜

The total size of the stimulus around 10 trillion over investment-led economic growth to return to the old?

"Micro stimulus" in place will become a "strong stimulus"?

Are strong stimulation, it depends on the shots or massive government intervention in the market;

As long as no massive credit expansion, not a "strong stimulus"

Under the guidance of the central "micro-stimulus" policies, the Yangcheng Evening News reporter observed that competed this year, the local government's stimulus policies, according to incomplete statistics, the scale has accumulated over 10 trillion. "Micro stimulus" is intended to adjust the structure of steady growth, but whether it will be implemented in the local government into a "strong stimulus"? Yesterday, the Yangcheng Evening News reporter interviewed Professor Lingnan College of Finance and Taxation Lin Jiang, he said, "micro-stimulus" policies are implemented to a degree where the problem does exist, but as long as a good grasp of the rhythm of the central and local stimulus and investment projects entirely controllable.

Around the stimulation of more than 10 trillion yuan total size

Copy of the latest data from the National Bureau of Statistics show that from January to May, the local investment 14.7 trillion, an increase of 17.6%, the growth rate down 0.2 percentage points, its lowest value since 2002.

But another group of messages have shown that early March this year, Sichuan raised the value of 2.88 trillion yuan investment plan, an increase of up to 40%, after Guangdong, Hainan, Tianjin and other cities announced five priority lists 7130000000000 project; recently introduced 65 in Heilongjiang measures, plans to invest more than 300 billion yuan steady growth. According to incomplete statistics, the total planned investment in the current provinces has reached 10 trillion yuan.

In fact, in early April of this year the State Council executive meeting decided to expand the small and micro enterprise income tax preferential scope, and proposed support shantytowns and speed railway construction policy is considered to be a series of targeted "micro-stimulus" begins; mid-April, the central bank announced that due to lower RRR county rural banks and rural cooperative banks; mid-June, for the "three rural" and small micro-stock banks usher in the second round of semi-directional drop. Many analysts had to Yangcheng Evening News reporter, said, "micro-stimulus" has become a year-round tone.

"Micro stimulus" hard landing into a "strong stimulus"

However, where up to 10 trillion total investment plan has sparked fears of many market participants, whether the central government introduced a series of orientation "micro stimulus" to the place where it will become "strong stimulus", thus stimulating investment return old it?

Yesterday, Professor of Finance and Taxation Lingnan College Lin Jiang told Yangcheng Evening News reporter, said, do not worry too much about "micro-stimulus" to place a "strong stimulus" problem, because ultimately take this degree or at the central level.

"As long as there is no large-scale credit expansion, it will not become a 'strong stimulation'." He said that in the past the "strong stimulus" There is a clear signal from the central enterprises and state-owned enterprises and guarantee bank loans to boost investment, "Now look, just off the central bank and the CBRC can good."

Stephen Green, head of research at Standard Chartered Bank Greater China, then use the "Local Government dream big, but actually do is limited," a word used to evaluate. He told reporters that he did not rule out the central level for GDP increasingly worried that the local government will increase the downward pressure on economic concerns, thus speeding up the local investment, "but the local government rushed to throw money at the same time focus on the project must be considered to funding problems. "

And it seems that the river in the forest, but also means that local governments correct steady growth and structural adjustment. Lin Jiang believes that the local government is also currently a platform to accelerate clean up local debt, supervision of the State Council is in fact Forced restructuring of local government, in order to avoid loss of direction in economic development, "if only to mention economic growth, structural adjustment is not good, highly dependent on local investment in fixed assets, worries difficult to dispense. "

The money come from? Test the ability of government funding

Municipalities up to 10 trillion yuan of investment behind the money come from to become an intricate puzzle. This year, the total scale of social financing and bank credit growth are called shrinkage, growth significantly decline. The previous government relies on the "land finance" is because of the current real estate market situation has become difficult to speculate.

"It is worth noting is that there is a lag of land finance phenomenon." Said Stephen Green, often need to buy a piece of land and then pay the balance after six months, from the data, the last large-scale land, so the first half of the land revenue does not there is a marked decline, "but I personally feel that the future of the land will become increasingly difficult to finance because of the size of the down the land auction." said Stephen Green, such as slum upgrading projects and other areas, as the central orientation stimulus, CDB will also give some support, "but undeniably, place a lot of pressure to raise funds."


Lin Jiang believes that the future of local government to raise money through the following channels will be two aspects of investment from the private sector, on the other hand is from financial innovation. "But this is definitely not mean that the government can not borrow money from the bank," Lin Jiang explained that one of the criteria to determine whether a "strong stimulus" to market behavior is still dominated massive government intervention.

Lin Jiang believes that from the commercial principles, as long as the bank identified risk control, some government investment projects can still get financing money from the bank, "of course, prefer to use the central government bonds, funds, guarantees and other financial instruments that can and revitalize the stock of private capital. "

It seems to have passed some provinces practices embodied, in June of this year, Shaanxi announced 39 projects open to social capital, covering six areas of transportation, water conservancy, a total investment of 270.4 billion yuan. Some media statistics estimate, Shaanxi, Hunan, Chongqing, Henan and other places, recently opened to the public funding of hundreds of investment projects totaling more than 950 billion yuan.