China's economic imbalances laid bare by new figures showing the rich get richer, as poor provinces lag
Cash from China's financial system flowed mainly to the affluent Pearl River and Yangtze River Deltas in 2019, while funding for hard hit rust-belt provinces dried up, according to new figures published by its central bank.
The figures offered fresh evidence of an increasing unequal financial landscape in the world's second biggest economy.
Rich areas continue to absorb more funds and talent to become richer, while poor areas lag behind. This imbalance presents a significant challenge for Beijing, as it attempts to navigate the wider issues that come with slowing economic growth.
Guangdong, the economic powerhouse adjoining Hong Kong, topped the list of provincial funding compiled by the People's Bank of China, receiving 2.92 trillion yuan (US$417 billion) in the form of bank loans, bond issuance, and trust investments. This was 11.4 per cent of the national total. Guangdong accounts for 8.1 per cent of China's population and 10.9 per cent of economic output.
In second place was Jiangsu, China's second largest provincial economy, which received 2.41 trillion yuan, followed by Zhejiang, another economic heavyweight, on 2.22 trillion. China's capital of Beijing was the only northern region to feature high up in the rankings, absorbing 1.46 trillion yuan in financial flows.
Hubei, meanwhile, the epicentre of the coronavirus, was in 10th position, with funding of 873.4 billion yuan (US$125 billion) last year.
Funding from China's banking system, the bond market and even the shadow banking network is often key to regional economic growth. China's southwesterly Yunnan province, for example, registered a nationwide high 8.1 per cent in gross domestic product growth. Over the same period, its fundraising rose by 43.5 per cent year-on-year to 492.6 billion yuan.
"Banks are usually more willing to extend credit to regions such as the Yangtze River Delta and Guangdong because their economies are open and vigorous," said Wen Bin, chief analyst at China Minsheng Bank.
The disparity is also a product of a shift in policy by the Politburo, the 25-member decision-making body headed by President Xi Jinping, taken last summer.
After decades of pursuing balanced development nationwide, China now aims to concentrate resources on the best-performing provincial and municipal economies rather than pumping money into poor areas to help them catch up.
The regions around Beijing, Shanghai and Guangdong are key to this strategy, with the combined western regions of Sichuan and Chongqing added to the list in January.
"China's economic layout is undergoing profound changes. Key cities and city clusters increasingly become the platforms supporting [economic] development," read the transcript of a Xi speech published in the December issue of Qiushi, the Communist Party's main theoretical journal.
Xi added that China must "make full use of comparative advantages" in important economic clusters and allow economies and populations to grow.
The provincial breakdown provided a glimpse into the effects of this changing economic policy. The four key regions accounted for 51.9 per cent of the total aggregated financing last year, 1.1 percentage points higher than 2018.
However, as the coronavirus wreaks havoc among China's provincial economies, the fight for a bigger share of the funding pie is set to intensify this year.
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