Hard Economic Landing for Industrial China in Q1 2014
GDP growth in certain parts of China’s industrial heartland plummeted to as little as 0.1 percent in the first quarter of this year, according to the National Bureau of Statistics, with provinces linked to heavy industry such as coal mining being especially hard hit. In light of these and other poor showings, Beijing has been scrambling to implement measures to prop up economic growth to meet its official target of 7.5 percent GDP growth for 2014.
In one of the hardest hit regions of the country, GDP growth in Taiyuan, Shanxi has slid from 12 percent a year ago to essentially zero today. Q1 economic growth for Shanxi Province as a whole (5.5 percent) was also among the worst nationwide, along with Heilongjiang, Hebei and Ningxia. These figures come in the wake of slowing demand for coal nationwide and anti-pollution measures aimed at curbing production. Shanxi produced 25 percent of China’s total demand for coal last year.
Among the provinces, Heilongjiang missed its target for Q1 GDP growth by far and away the biggest margins—a whopping 5.6 percent. This was attributed to a “very rare fall” in petroleum output, a critical component of the provincial economy. Hebei, which surrounds Beijing, saw growth drop to 4.2 percent, nearly half of that from one year ago.
These figures come even after Q1 GDP targets for 22 provinces were lowered following the 2014 annual meetings of the National People’s Congress and Chinese People’s Political Consultative Conference. While in the latest World Bank assessment, China’s manufacturing industry appears to be back on track, the greater worry now is that repeated slowdowns such as this one will perpetuate an unsustainable level of government-led investment and credit expansion.
GDP growth for all of China’s provincial-level divisions is provided in the table below. Provinces that missed their Q1 GDP target by more than 2.5 percent are highlighted in red.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.