Behind a Chinese City's Growth, Heavy Debt

The Chinese city of Chongqing accumulated tens of billions of dollars in liabilities during Bo Xilai's term as local Communist Party chief, as it juiced growth that helped launch the former high-flyer's campaign for a top political post. A Wall Street Journal analysis of Chinese rating-company reports shows that 10 major investment vehicles the city used to fuel its growth accumulated more than 346 billion yuan ($54 billion) in liabilities, as it recapitalized banks and built highways, bridges and other projects that boosted growth and helped attract global companies looking for an entry into China's booming inland markets. In 2007, when Mr. Bo became Chongqing's party chief, its top post, those vehicles had total liabilities of 162 billion yuan. Those debts likely represent only part of Chongqing's obligations, analysts say, because state-owned enterprises and property developers have liabilities of their own. The figures also exclude a number of smaller investment vehicles. Chongqing, a smoggy city straddling the Yangtze and Jialing rivers, isn't the only Chinese city to take on heavy debt to build roads and other infrastructure in a bid to energize growth. But the city's situation illustrates the tough choices facing the world's second-largest economy after the U.S.'s, as many analysts and even some Chinese leaders warn that the nation's traditional reliance on big government spending could leave its economy dangerously unbalanced and open to corruption. China is looking for way to increase domestic consumption to lessen its dependence on investment and exports. Read more. (Subscription required.)