All but one of China’s provincial level governments ran deficit at start of 2019, raising further funding fears
- Shanghai was the only authority that ran a surplus financial position in the first six months of the year
- News follows takeover of Baoshang Bank and bailout of Bank of Jinzhou, leaving local governments and financial institutions in need of capital or even help from Beijing
Fears over China’s ability to manage its domestic economy alongside the trade war with the United States have further increased after 30 of the 31 provincial level governments are reported to have ran at a deficit in the first six months of 2019.
Shanghai was the only authority that ran a surplus financial position in the first six months of the year.
“We don’t expect a banking crisis, but see extensive recapitalisation and consolidation [of the banking sector] as inevitable,” said Diana Choyleva, chief economist of the London-based consultancy Enodo Economics.
We don’t expect a banking crisis, but see extensive recapitalisation and consolidation [of the banking sector] as inevitable
In addition, “debt as a share of [gross domestic product] is set to rise again, an unwelcome trend. China has scope for one more credit-driven stimulus, but that’s all – unless it fundamentally changes its economic model.”
