Research Publication: Combing through the creditworthiness of regional governments in Sichuan Province


11 Jul 2022

    HONG KONG, 11 July 2022. Pengyuan International has today released a research report “Combing through the creditworthiness of regional governments in Sichuan Province”.

    The key takeaways from this report are as follows:

    Economic development of the prefecture-level regions in Sichuan is relatively unbalanced, showing a pattern of “one superpower and many weak”.

    Chengdu reported a GDP size of RMB1,991.7 billion in 2021, representing 37% of the gross regional production (GDP) of the Sichuan province, while over half of its peers had a GDP of less than RMB200 billion. Only Chengdu and Panzhihua in Sichuan outperformed the national average in 2021. The capital city has a siphon effect on the population and resources of its peers in the province, which to some extent, hinders the economic development of some prefecture-level cities such as Ziyang and Bazhong, which have seen severe population outflows in recent years. Apart from Chengdu, prefecture-level cities including Yibing, Deyang, Leshan and Luzhou possess higher economic scores based on our calculations.

    There are considerable gaps among the budgetary strength and debt level of various cities in Sichuan province.

    Chengdu takes a lead in overall budgetary revenue strength in Sichuan with its budgetary revenue amounting to RMB426.7 billion in 2021, but the city also bore major government debts for the province. Our calculation shows that the debt to revenue ratio of Chengdu was the highest among prefecture-level governments at 268% in 2021. There are some other prefecture-level cities that had higher budgetary strength scores, including Yibin, Mianyang, Meishan and Panzhihua. On the other hand, cities such as Guang'an and Ya’an had weak economic and fiscal strength, but their overall debt burden is relatively light.

    Economic and budgetary strength of the districts and counties in Chengdu has obvious location characteristics.

    In terms of GDP, the economic scale of the districts and counties in Chengdu shows the order that the central urban area is stronger than the suburban areas, and the suburban areas are stronger than the exurbs. The central urban areas (such as Qingyang, Jinjiang and Wuhou districts), and surburb areas with solid industrial foundations and high economic growth (such as Wenjiang, Shuangliu and Qingbaijiang districts) have a good budgetary revenue base and relatively strong budgetary strength.

    Liquidity condition of county-level divisions of Chengdu as a whole is better than other prefecture-level cities in Sichuan province.

    Chengdu’s fiscal deposit to debt interest payment ratio is estimated to be 1,172%, and its broad liquidity coverage ratio to be 315% during the 2022-2023 period. This reflects that despite the city’s large debt scale, it has gathered the fiscal resources from Sichuan, hence maintaining overall high liquidity and strong solvency. Therefore, the liquidity status of the districts and counties in Chengdu is also better than the average level of other prefecture-level cities in Sichuan province. We estimate that the liquidity indicators of Ya'an and Bazhong are relatively weak, indicating the governments’ relatively tight liquidity.

    Sichuan has shown much disparity in stand-alone indicative credit estimates (ICE) of prefecture-level governments. After considering the support of their higher-level governments, the results of indicative credit estimates are relatively concentrated.

    The stand-alone indicative credit estimates of prefecture-level governments in Sichuan were mostly at {bbb} and {bb+}. Nevertheless, the indicative credit estimates of the prefecture-level governments are substantially enhanced after taking into account the support from their higher-level government (Sichuan provincial government), with half at {BBB+}. Likewise, the overall creditworthiness of county-level divisions of Chengdu is also improved if support from higher-level governments is factored in, with more than half of the indicative credit estimates at {BBB}.

    Note: Indicative credit estimates expressed in this report are Pengyuan International’s view on creditworthiness derived from desktop analysis based on public information. This research involved using public information to generate a potential opinion on the creditworthiness of local governments in Sichuan province. It is critical to stress that the credit opinions presented in this report are not credit ratings and should not be construed as such, nor should they be construed as an indicator of a final credit rating on any particular issuer, but rather are preliminary opinions of possible creditworthiness based on the research performed.

    This research report is written in Chinese. In case of any discrepancies between the English version and the Chinese version, the Chinese version shall prevail.

     

    ANALYST CONTACTS

    Primary Analyst

    Jameson Zuo, FRM

    +852 3615 8341

    jameson.zuo@pyrating.com

    Secondary Analyst

    Siqi Lin

    +86 755 83210225

    siqi.lin@pyrating.com

    Committee Chair

    Ke Chen, PhD

    +852 3615 8316

    ke.chen@pyrating.com

    Media Contact

    media@pyrating.com

    Rating Services Contact

    Allen Wei

    +852 3615 8324

    allen.wei@pyrating.com

    Date of Relevant Committee: 30-June-2022

    Additional information is available on www.pyrating.com

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