China's infrastructure spending to decline amidst debt risk control

The planned capex across 12 regions will drop by 23% in 2024.

Infrastructure spending in China will likely decline in 2024 as it focuses on containing debt risks, Fitch Ratings reported. 

“This could lead to risks for economic growth, although slower debt growth could be supportive of long-term fiscal sustainability in these regions,” the report read.  

“Leverage, in the meantime, may not decrease for local-government financing vehicles (LGFVs) in these regions.”

Fitch noted addressing local government debt risks is amongst China’s policy priorities. This also aligns with news reports that the central government has instructed 12 regions to postpone or suspend certain government-led infrastructure projects to prevent worsening their debt burdens. 

“Our analysis of the 2024 budgets at these 12 regions shows a consistent trend. Their planned capex for 2024 will decline by 23% from 2023, with Guizhou, Ningxia, Heilongjiang, and Yunnan provinces projecting the largest reductions in spending,” Fitch Ratings noted. 

“Guangxi and Qinghai are the exceptions among the 12 regions, having budgeted an increase in capex this year.”

Some may revise the budget with a slightly higher capex for 2024 if they receive additional central government transfers or an increased quota for special-purpose bonds throughout the year.