Credit quality polarised among China’s local governments

It is often assumed that China’s local and regional governments are all mired in unsustainable debt, but it turns out that not all provincial governments are created equal.

Rating agency Standard Poor’s has spent the past few years assessing the creditworthiness of several local governments in China and found wide variation. Some of them do indeed have big debts and contingent liabilities, but many others boast solid budgetary performance and ample liquidity, SP said in its report, published yesterday.

The credit ratings it has assigned range from speculative grades of B to BB, up to the investment-grade level of AA-, which is the same...