Provincial GDP Growth Slows in Q1

Provinces across China posted slower GDP growth in the first quarter, with some central and western regions particularly affected, which analysts said put added urgency on a shift in the nation's economic growth model.

Sichuan Province, for example, grew 10.2 percent year-on-year in the quarter, 2.9 percent lower than its growth in the first quarter of 2012.

Henan Province's GDP growth also dropped 2.9 percent from a year earlier to 8.4 percent, according to figures released by local bureaus of statistics.

Even Guizhou Province, which led the country's GDP growth in the last year, saw a 2.4 percent first-quarter drop compared to 2012.

However Guizhou still enjoyed a 12.6 percent growth, the nation's second-best performance after Gansu's 12.9 percent.

The slower growth has now made many provinces' annual GDP growth targets difficult to achieve, said experts.

At the beginning of this year, inspired by the outlook that the nation's economy was recovering, 24 regions had set their growth targets for 2013 at or higher than 10 percent.

Officials in Henan are believed to have already admitted that with an 8.4 percent growth in the first quarter - the first time the province's growth has dropped to single-digit since 2009 - its 10 percent annual growth target will be difficult to realize.

China's GDP grew 7.7 percent year-on-year in the first quarter, down from 7.9 percent in the fourth quarter of 2012 and lower than many economist forecasts, raising concerns that the economic recovery that began in the fourth quarter is already losing steam.

Lin Jiang, a professor with Lingnan (University) College, a business school attached to Guangzhou's Sun Yat-sen University, said that economic growth in China's western regions is still heavily reliant on fixed-asset investment, and a large portion of the investment came from transfer payments from the central government.

He added that as national growth slowed and fiscal revenues faced increasing pressure, transfer payments had declined and investment growth slowed.

China's national fiscal revenue in the first quarter rose 6.9 percent year-on-year, 7.8 percentage points lower than in the first quarter of 2012. The central government's revenue even contracted 0.2 percent.

"Central government revenues are mainly made up of value-added tax and corporate income tax," said Wang Zhaocai, deputy director of Research Institute for Fiscal Science under Finance Ministry.

"These taxes are closely related to industries and logistics, which reveals more about the national economy."

With dwindling transfer payments and accumulating debt, experts said the borrowing- and investment-led growth models used by many western and central regions were increasingly unsustainable.

Zhang Yugui, dean of the College of International Finance and Commerce at Shanghai International Studies University, said he was worried that marginal returns on investments are declining, meaning that even if investment picked up, its effect on GDP might not be as strong as it used to be.

An earlier report from the International Monetary Fund said some types of investment in China are excessive, especially in inland regions.

In contrast, in coastal provinces private consumption has on average become more self-sustaining and less dependent on investment.

This was backed up by first-quarter GDP figures in China's seaboard regions.

Though registering lower GDP growth than inland regions, their growth edged up in the first quarter, with Guangdong Province picking up by 1.3 percent over the first quarter of 2012, and Zhejiang Province accelerating 1.2 percent.