Virtually all provincial-level regions report Q1 slowdown

The east coast export powerhouse of Zhejiang was the only provincial-level region in China to achieve higher growth in the first quarter, when resource producers and heavy industrial bases were hit hard by tough business conditions.

As of last Friday, all 31 regional governments in the Chinese mainland had released first-quarter GDP growth data. Expansion slowed in 30 regions from that of last year, a compilation by China Daily showed.

The sharpest drop occurred in Liaoning province, where growth slumped by 3.9 percentage points to 1.9 percent. Year-on-year expansion was also the slowest among all regions.

The second-largest fall was in Hainan province (down 3.8 percentage points) and the Xinjiang Uygur autonomous region (down 3.1 percentage points).

In Zhejiang, however, growth accelerated to 8.2 percent from 7.6 percent.

On a national basis, GDP growth further slowed to a six-year low of 7 percent, down from 7.3 percent growth in the fourth quarter of 2014.

Core sectors in various regions determined each one's overall performance.

Resource producers and heavy industrial bases were hit hard by sliding producer prices, which have been declining for more than three years. The national Producer Price Index fell 4.6 percent year-on-year in March alone, the 37th straight month of decline.

Liaoning, a manufacturing stronghold that grew rapidly in previous years, saw its growth plunge as industries grappled with a capacity glut and investment tumbled.

Steel, cement and iron ore output fell in the first quarter for the first time in years. As a result, industrial output contracted 5.9 percent. With a glut of unsold housing, property developers slashed investment. As a result, total investment tumbled 18.5 percent, whereas a year earlier it expanded 17.2 percent.

Underscoring the severity of the slowdown, Premier Li Keqiang visited Jilin province on April 10 and convened leaders from the three northeast provinces to discuss the situation. Leaders of the top economic planner, the National Development and Reform Commission, visited Liaoning in late March.

Major coal producer Shanxi province's problems showed no sign of easing, with GDP growth slowing further to 2.5 percent from 4.9 percent a year earlier. The province was crippled by falling coal prices and the exposure of widespread corruption that the Chinese media have termed a "corruption landslide".

"It lays bare the shortcomings of the traditional growth model," said Liu Qiao, a professor of finance at the Guanghua School of Management at Peking University. He said leaders of these regions should reflect on their traditional approach, patiently seek new growth sources and refrain from pump-priming via big infrastructure projects.

The effect of the slowdown was very evident in local governments' fiscal revenue. General fiscal revenue at the local level just grew 4.9 percent in the first quarter, the slowest rate since 1994. Revenue from land sales, a pillar of local governments' income, slumped 36.1 percent.

In further evidence of growing concern over provincial budgets, the Ministry of Finance on Tuesday warned in a circular of slowing tax revenue growth.

It also told local authorities to hasten issues of municipal bonds, a newly approved source of borrowing.