Caixin
Aug 01, 2013 06:09 PM

Guangdong Lawmakers Cast Doubt on Official Figures for Growth


(Guangzhou) – Lawmakers in Guangdong Province have openly challenged the local government on the credibility of its economic statistics and questioned the provincial capital's heavy reliance on fees from land sales used to ease debt worries.

In a meeting of the standing committee of the provincial people's congress on July 31, representatives from the congress' finance office released a survey on economic conditions in Guangdong in the first half of 2013 that included facts contradicting official data.

The survey shows that electricity consumption of industries dropped 0.1 percent in the first five months compared to the same period last year, but the official GDP figure rose 12.9 percent over the same period. GDP growth usually moves in tandem with industrial power consumption, an official from the congress' finance team said.

"Whether statistics truly reflect the economic condition is worth debating," the survey concluded.

In addition, provincial lawmakers included in their report a warning for Guangzhou: "If the government keeps using fees from land sales to pay off debt, it will lead to a continuous increase of government debt."

The source from the congress' finance team told Caixin that lawmakers worry a revenue model based on fees from land sales will lead to two problems. First, local governments tended to borrow excessively because they had an easy source of revenue. Also, the model closely links government coffers and the real estate market, meaning a slump in the latter can cause a fiscal crisis.

Guangzhou officials say fees collected by selling land to developers totaled 30.7 billion yuan in the first half of the year, 2.2 times the figure for the same period last year.

Guangzhou is feeling a squeeze due to rising government debt amid difficulties raising money from the capital market. The ratio of total government debt to income reached 100 percent at end of June, and debt plus interest due this year is 20 percent of projected income, an internationally accepted red line.

Provincial finance officials told lawmakers that since banks have become reluctant to lend to Guangzhou due to its high debt ratio, the city plans to use bonds to fund infrastructure projects.

The congress report said the government should be mindful of risks. "For the second half of 2013, (it should) prevent fiscal risks from becoming financial risks, or vice versa, and be alert to risks associated with local government debt and credit."

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