Equity Tips, How one Chinese region shows risks of relying on heavy borrowing

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SHENYANG, China - 

A flurry of construction in the Chinese city of Shenyang belies a regional economy in crisis, a striking example of the increasingly diminishing returns from a policy of investing heavily in infrastructure to prop up economic activity. A new exhibition center has just opened its doors in the city, the capital of Liaoning province in northeastern China, and the skyline is dotted with cranes working on high-end shopping malls and apartments. But beyond Shenyang's building sites, the real Liaoning is different. 

After years of investment in infrastructure, some of it encouraged by the central government, Liaoning is China's only shrinking provincial economy, its population is in decline and its debt is almost three times annual revenues. Liaoning highlights the risks of relying on repeated borrowing to invest in infrastructure and fuel economic activity - a regular fall-back policy China has used when GDP risks missing annual targets, including in 2016.