China’s northwest Qinghai region has come bottom of the league of 31 provincial-level governments ranked by one of the country’s major credit ratings agencies for the fifth year in a row as it struggles with a weak economy and a high debt burden relative to its fiscal firepower, reported Caixin.
Qinghai, a sparsely populated province that’s highly dependent on the oil and gas industry, salt mining and animal husbandry, was given a credit score of 69.3 in the latest annual report from Golden Credit Rating International, down from 73.2 in 2018. The southern coastal province of Guangdong came top of the list with a score of 89.6, regaining the top spot it lost in 2018.
The report highlights a wide divergence in the strength of local governments across the country that prompted the Ministry of Finance to make one of its key tasks for 2020 improving regional equality in terms of allocation of fiscal resources and promoting a new pattern of coordinated regional development. It also underscores the increasing costs some provinces and their local government financing vehicles (LGFVs) may face when they sell bonds this year, as they are forced to pay higher interest rates to reflect their weaker financial positions and credit rankings.
A report by Moody’s Investors Service in October said that while Qinghai’s total outstanding debt at the end of 2018 was RMB 176.3 billion ($25.7 billion), the third lowest in China, its debt-to-GDP ratio of 61.5% was the highest in the country. In contrast, Guangdong’s debt-to-GDP ratio at the end of 2018 was 10.2%, the second lowest in the country, even though its total outstanding debt was RMB 995.8 billion, Moody’s said in a report on the province in April.