Chart 1

Jiangsu has the second largest GDP among Chinese provinces. It is on mainland China's east coast and encompasses one of the country's most vibrant metropolitan areas, the Yangtze River Delta Economic Zone. Jiangsu's industrial sector is steadily moving to higher value-added production on the back of continued investment into diverse enterprises (see chart 1).

The Jiangsu provincial government is a tier-one LRG under China's fiscal system and legislative framework. The province administers 13 city governments--including the capital city of Nanjing--which we collectively classify as tier-two local governments.

Regional Highlights

The income level in Jiangsu is high compared with other regions in China (see chart 2). The debt burden of governments in the region is also high, involving large borrowings by SOEs (see chart 3). Income levels and debt burdens vary widely across the 13 cities (see charts 4 and 5).

Chart 2

Chart 3

Chart 4

Chart 5

Provincial Government

Measures of creditworthiness

We view the Jiangsu provincial government (Jiangsu province, or Jiangsu) as a tier-one government. We assess its institutional framework as "very predictable and well balanced." China's stable public finance system supports this view. China's nationally defined fiscal policy framework helps LRGs manage fiscal risks, and this includes the possibility of exceptional support from the central government in times of stress.

Our assessment is constrained, however, by a lack of detail in China LRGs' fiscal disclosures. The sector also carries large exposure to government-related entities (GREs), and we can only estimate the extent of an LRG's ultimate obligations should one of these entities falter. In addition, China's centralized system gives tier-one LRGs limited flexibility to respond to a fiscal strain, should one materialize.

We generally view the individual credit profile on Jiangsu as strong compared with that on other tier-one governments in China (see table 1 and charts 6-9).

Table 1

Chart 6a

Chart 6b

Chart 7

Chart 8

Chart 9

Measures of SOE support

We generally view the capacity of the Jiangsu government at the provincial level as sufficient to support its SOEs (see charts 10-12). However, such support is likely to turn increasingly selective in a stress scenario. Data from Wind suggest SOE debt at the Jiangsu provincial level (tier one), city level (tier two), and district level (tier three) at about 5%, 40%, and 55%, respectively, of total SOE debt in the whole region.

Table 2

Chart 10

Chart 11

Chart 12

City Governments

Measures of creditworthiness

We view the 13 city governments under the administration of the Jiangsu provincial government as tier-two local governments. Their institutional framework is "evolving but balanced," in our opinion. China's stable public finance system, which is increasingly tied to centralized policies set by Beijing, supports this assessment. China's nationally defined fiscal policy framework helps tier-two LRGs manage fiscal risks, and this includes the possibility of exceptional support from the central government in times of stress.

Our assessment is constrained, however, by a lack of detail in the governments' fiscal disclosures. The governments also carry large exposure to GREs, and we can only estimate the extent of the ultimate obligation of an LRG, should one of these entities falter. In addition, China's centralized system gives tier-two LRGs limited flexibility to respond to a fiscal strain, should one materialize.

The individual credit profiles on city governments in Jiangsu are generally weaker than that on the Jiangsu provincial level, in our view. Individual credit profiles diverge widely across the 13 cities. The economic profiles on Jiangsu's city governments are generally stronger than that on other city governments in China. However, most of Jiangsu's city governments carry a higher debt burden, largely driven by large debt-funded capital spending by LRGs and key SOEs.

We provide a comparison of six city governments in Jiangsu by anchoring their credit metrics and assigning a local rank relative to 48 selected city governments in China (see charts 13-16, and see the risk indicators section in "Chinese Tier-Two Local Government Risk Indicators," published Nov. 28, 2021, on RatingsDirect). The six Jiangsu city governments account for about 60% of Jiangsu's GDP.

Chart 13a

Chart 13b

Chart 14

Chart 15a

Chart 15b

Chart 16

Measures of SOE support

The capacity of city governments in the Jiangsu region to provide SOE support is generally weaker than that at the Jiangsu provincial level, in our opinion. The capacity for such support varies widely. Some cities may not be able to provide timely support to their SOEs in a stress scenario, assuming that neither Jiangsu nor the central government stepped in (see charts 17-19). In line with the center's policy direction, city governments in Jiangsu can only selectively support liquidity-strained SOEs under their auspices. SOE debt at the city level of the selected six city governments together accounts for about 60% of the SOE debt of Jiangsu's city-level governments (see "SOEs In Focus: Jiangsu Province, China--The Year For More Balanced Growth," March 14, 2022).

Chart 17

Chart 18

Chart 19

Related Research

• SOEs In Focus: Jiangsu Province, China--The Year For More Balanced Growth," March 14, 2022
• Chinese Tier-Two Local Government Risk Indicators, Nov. 28, 2021
• China GRE Ratings List, Sept. 21, 2021
• Institutional Framework Assessment: China Provincial Governments, Aug. 31, 2021
• Institutional Framework Assessment: China Tier-Two Governments, Aug. 31, 2021
• China Provincial Governments' Risk Indicators, June 16, 2021
• China LRGs In Focus: Jiangsu Province, March 24, 2020

Appendix

Table 3

Table 4

Table 5

Table 6

Glossary

LRG:   Local and regional government.

Tier-one LRG:   Provinces, autonomous regions, municipalities, and cities with state-planning status.

Tier-two LRG:   Cities, autonomous prefectures, and districts of municipalities.

Tier-one sector:   An aggregation of 36 tier-one LRGs, as defined in our risk indicator article for such tier-one governments (see "Related Research," above).

Tier-two sector:   An aggregation of 48 tier-two LRGs, as defined in our risk indicator article for such tier-two governments (see "Related Research," above).

Oprev:   Operating revenues of LRGs.

Caprev:   Capital revenues of LRGs.

Ttlrev:   Total revenues of LRGs, mainly to consolidate both operev and caprev.

BACA:   Balance after capital account of LRGs.

BACA %:   Total revenue subtracted by total expenditure, as a percentage of total revenues.

Direct debt:   Bonds directly issued under the name of a given LRG.

Direct debt %:   Direct debt, as a percentage of an LRG's total revenues.

TSD:   Tax-supported debt, including direct debt and debt of key SOEs.

TSD %:   Tax-supported debt, as a percentage of operating revenues of an LRG and those of key SOEs.

TSD % excluding onlending:   Tax-supported debt excluding onlending to lower-tier LRGs, as a percentage of operating revenues of an LRG and those of key SOEs.

SOEs:   State-owned enterprises controlled by LRGs.

Key SOEs:   SOEs that focus on important infrastructure development or on providing services to fulfill public mandates in their regions, and which depend on LRG support.

SOE size %:   Aggregated debt of SOEs controlled by LRGs as a proportion of LRG total revenues.

SOE sector leverage (or SOE leverage):   The proportion of an SOE's aggregated debt to aggregated EBITDA.

SOE sector coverage (or SOE coverage):   SOEs' cash and short-term securities measured against their short-term debt.