China’s central government has ordered a small city in Inner Mongolia to halt construction of a Rmb30.5bn ($4.6bn) subway project, signalling Beijing’s willingness to sacrifice growth in order to rein in financial risks.
The city of Baotou had intended to fund 60 per cent of the project’s cost from bank loans and held a groundbreaking ceremony in May, which was attended by Baotou’s top two officials.
Over the past decade, local governments have relied on debt-funded investment projects to bolster their economies. In August the IMF warned that China’s non-financial sector debt would exceed 290 per cent of gross domestic product by 2022, compared with 235 per cent last year.
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