Local growth bottoms out in second quarter

Local governments' pivot to growth also played a role. In a sign of growing frustration over local governments' inertia in implementing the pro-growth and reform directives, the State Council sent eight inspection teams around China in late June.

In a meeting last week, local officials were criticized by the cabinet for being "lazy and slack" as officials kept their heads down to stay out of trouble during the anti-corruption campaign.

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In recent weeks, regional governments have announced their own versions of "stimulus" programs. Northern Hebei province will invest 1.2 trillion yuan in a range of areas including railways, energy and housing. Northeast Heilongjiang will spend more than 300 billion yuan over two years in several sectors, including infrastructure and mining.

Guangzhou, capital of Guangdong province, will invest 800 billion yuan in the next few years to upgrade its urban infrastructure, mostly transportation.

Local governments have also been active in approaching the National Development and Reform Commission to secure approval for large-scale investment projects. Officials from Hubei, Jiangxi and Sichuan visited the top economic planner hoping to speed up approval of their applications for such projects, Chinese media reported.

"This is one of many clear signs that the economy is still relying on debt-fueled spending to maintain growth," said Stephen Green, Standard Chartered Plc's head of China research, who estimated total debt has climbed to 251 percent of the country's GDP.

Wang Tao, chief China economist at UBS AG, said local investment plans are relatively small compared with nationwide totals and it is hard to judge whether the spending is new or part of earlier plans.

But "as the most direct way to boost investment and growth, increased investment in infrastructure and public services will be an indispensable part of the policy mix," said Wang.