Local Governments’ Activities Key To Chinese Growth: Goldman Sachs

As local governments’ activities are facing multiple headwinds in China, Chinese growth hinges on the will and means of local governments, notes Goldman Sachs.

Andrew Tilton and team at Goldman Sachs in their May 18, 2015 research report titled: “Chinese growth hinges on the will and means of local governments” note that local governments (LGs) have aggressively lowered their growth targets in recent years.

Local governments’ key role in Chinese growth

According to the Goldman Sachs analysts, LGs constitute a large share of the Chinese economy. Apart from current spending, LGs are also responsible for massive infrastructure investment in local regions. Moreover, LGs’ expenditure was funded not only by on-budget fiscal revenue, but also through off-budget land sales and borrowing. Tilton...