Local govts criticized for excessive investment

A major State-owned bank has warned that some local governments might supercharge investment in the name of new urbanization.

In its research report released on Feb 5, the Agricultural Bank of China warned of the danger of supercharged investment as a new government takes office this year and new urbanization becomes a policy priority.

"The leadership reshuffle at the local government level usually brings an impulse for investment. And the advance of new urbanization might lead some local governments to over-invest in the name of new urbanization," the report said.

A total of 19 provinces across China have set an investment growth target that is above 20 percent. Most of them are in central and western region.

Guizhou has vowed to "ensure" a 30 percent investment growth and "strive for" a 40 percent target. West China's Xinjiang and Gansu, and Northeast China's Heilongjiang have also set an investment growth target above 30 percent.

Critics said local governments' investment often reaps a low return and the last round of massive stimulus plan amid the 2008-09 financial tsunami was the cause of current overcapacity.

Media reports said at the end of January that some banks received notices from financial regulators to halt new loan issuing due to the intensive growth of new loans in the first half of January.