Which Chinese provinces have annual fiscal deficits of more than $500 billion?

The provinces and cities that ranked highest in China’s general public budget revenue in 2020 generally had a higher growth rate of expenditure than revenue during that period. Data source: Official reports from provinces and cities.

Since the beginning of this year, mainland media have been scrambling to report on the GDP growth of China’s provinces and cities in 2020, but have rarely disclosed that the cost is a huge fiscal deficit and a sharp increase in debt. 2020 fiscal deficits are generally worse than the previous year in 31 Chinese provinces and cities, and the growth rate of fiscal spending is mostly higher than the growth rate of fiscal revenue.

According to official statistics, except for Shanghai, Beijing, Guangdong and Zhejiang, the fiscal self-sufficiency rate of all provinces and cities is below 70%, and four of them have deficits of more than 500 billion yuan (RMB), with the deficit of Sichuan, which ranks first, pushing 700 billion yuan in one year.

According to the information provided by the provincial governments, the four provinces with fiscal deficits of more than 500 billion yuan in 2020 are, in descending order: Sichuan, Henan, Hubei and Hunan. The top-ranked Sichuan has a fiscal deficit of 694.3 billion yuan, while the other three provinces have 622.8 billion yuan, 592.7 billion yuan and 539.4 billion yuan, respectively.

In the previous year 2019, the same four provinces ranked among the top in the country in terms of fiscal deficit size, again all over 500 billion yuan. And in both years, their total annual GDP values squeezed into the top 10 of the country’s 31 provinces and cities.

In 2020, the GDP of the four provinces will be between RMB 4 trillion and RMB 5.5 trillion, with the exception of Hubei, whose GDP will decline by 5%, while the rest will grow by 3.8% to 1.3%, but the fiscal self-sufficiency rate of the four provinces will be only 30% to 40%.

The above fiscal self-sufficiency rate is compared to the international common algorithm, that is, the ratio of “local general public budget revenue” to local “local general public budget expenditure”.

In recent years, financial circles have often cried out that China’s GDP is not the only concern, but its rapidly increasing debt, which is several times faster than economic expansion.

In addition to the fiscally recognized “explicit debt” of local governments, there is also the “hidden debt” financed by various platforms such as the Urban Construction Investment Corporation (UCI).

According to a recent report issued by GF Securities, as of the end of 2019, the largest total balance of explicit and implicit debt in the four provinces mentioned above is 3.4 trillion yuan in Sichuan, followed by 2.6 trillion yuan in Hunan, 2.5 trillion yuan in Hubei and 2.1 trillion yuan in Henan. Among them, Sichuan and Hubei’s total debt increased at an annual rate of up to 27% and 28%. Analysts say the interest and principal of these debts are unaffordable for local revenues.