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Economic contraction deepens in China’s corruption-hit Liaoning as all other provinces mark growth

Gross domestic output in China’s debt-ridden rust-belt province of Liaoning fell by 2.2 per cent in the first nine months this year, deepening a 1 per cent drop in output recorded during in the first half of 2016.

Liaoning, which has been plagued by rampant corruption, is the only province in the country to report an absolute fall in economic output over the January to September period – a time when China’s national economy expanded by 6.7 per cent.

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Among China’s 31 provinces, municipalities and autonomous regions, Chongqing and Tibet topped the rankings for economic performance with growth rates of 10.7 per cent. Only three provinces reported growth rates below the national average – the other two joining Liaoning were Shanxi, with a 4 per cent growth rate, and Heilongjiang, with 6 per cent growth.

“This is not a surprising result for Liaoning as it is a province that is heavily reliant on energy,” said Julia Wang, a greater China economist at HSBC.

She added that the economic trend in the region was actually getting a little better when all of its industrial figures were taken into consideration.

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As for fast-expanding southwestern mega city of Chongqing, Julia said its growth was being driven mainly by investment in infrastructure provided by government financing.

This was a model that had been widely adopted by other regionsand had become one of the major drivers of the nation’s economy.

Zhou Jianping, head of a department at the National Development and Reform Commission, the country’s economic planning agency, which plans to revitalise the northeastern region’s economy told a press conference last week: “It will require a lot more effort to normalise Liaoning’s economy.”

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Economic recession has been a relatively unknown concept for most Chinese regions during the past three decades of unstoppable growth, but as the country’s economy matures, places such as Liaoning have begun toexperience a persistent economic downturn, resulting in an exodus of both talent and capital.

Dongbei Special Steel, a debt-ridden state-owned enterprise backed by the Liaoning provincial government, started bankruptcy proceedings last month after the apparent suicide of Yang Hua, its former chairman, defaults on 5.8 billion yuan (HK$6.7 billion) of bonds and fruitless debt-to-equity swap talks with bank creditors.

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The province also created an ­unprecedented political crisis after more than half of the people on its provincial legislature were ousted for corruption.

China’s biggest provincial economies, including Guangdong, Jiangsu and Zhejiang, reported growth rates higher than 7 per cent.