By Ellen Zhang and Marius Zaharia
BEIJING/HONG KONG (Reuters) - Some of China's most indebted local governments are on a hiring spree, a move that analysts say could put fragile regional finances under more strain as officials seek to create jobs for a record number of graduates entering the workforce this year.
China's huge and rising local government debt, totalling $9 trillion, or about half the nation's gross domestic product, is one of the biggest threats to fostering sustainable growth in the world's second largest economy.
Beijing has said defusing these debt risks is one of the government's major tasks this year, while it's also prioritising job creation in an economy still reeling from years of costly COVID-19 lockdowns, travel curbs and other containment measures.
In poorer areas, which are bleeding people and private business to urban centres, the task of providing jobs falls more squarely on local governments at a time they are struggling to raise revenue through income tax and state land sales.
"This type of strategy could be partly calculated to keep educated young people within the province, rather than seeing them leave for more developed regions," said Jack Yuan, vice president and senior analyst at Moody's.
However, "budgetary and debt pressures are more acute for these provinces, so increasing expenditure comes with additional fiscal risks," Yuan noted.
The provinces of Gansu and Yunnan as well as the region of Guangxi, are set to see the biggest percentage increase in hiring for civil servants in China this year, according to Offcn Education Technology Co, one of the country's largest tutoring firms for the public service examination.
Gansu, in China's arid, remote northwest, plans to hire 4,249 civil servants, nearly 80% more than last year, while Yunnan and Guangxi in the country's mountainous frontier to the south, will add 5,696 and 6,781 personnel, an increase of 59% and 55%, respectively.
The overall number of jobs being added across mainland China's 31 provinces, regions and municipalities, is around 190,000, a 16% increase from 2022, financial media outlet Caixin reported.
The local governments adding the most jobs in relative terms are also among the most indebted. Yunnan's outstanding debt to fiscal revenue hit 1087% last year, the highest among all provincial-level economies. Gansu was third at 970% and Guangxi was fifth at 910%, according to research by Chinese brokerage TF Securities.
The local governments of Gansu, Yunnan and Guangxi did not respond to a request for comment and Reuters could not establish exactly why the governments are ramping up hiring and how it will impact their finances. But it is causing anxiety among economists.