Hong Kong
CNN
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Three years of strict pandemic controls in China and a real estate crash have drained local government coffers, leaving authorities across the country struggling with mountains of debt. The problem has gotten so extreme that some cities are now unable to provide basic services, and the risk of default is rising.
Analysts estimate China’s outstanding government debts surpassed 123 trillion yuan ($18 trillion) last year, of which nearly $10 trillion is so-called “hidden debt” owed by risky local government financing platforms that are backed by cities or provinces.
As the financial pressure has mounted, regional governments have reportedly been slashing wages, cutting transportation services and reducing fuel subsidies in the middle of a harsh winter.
Thousands of people in the northern province of Hebei had trouble heating their homes in November and…
2023-02-01 06:27:20 China’s cities are struggling to pay their bills after three years of Covid and a real estate crash
Original from www.cnn.com For the last three years, China has been struggling to pay its bills in an atmosphere of public health crisis due to Covid-19 and a real estate crash. In the past few months, many cities in China have found themselves unable to pay their bills. This problem has been compounded by falling revenue as a result of the pandemic and real estate crash.
The lack of revenue has put especially large cities, such as Shanghai and Shenzhen, in a vulnerable financial position. For example, in December 2020, Shenzhen failed to cover social welfare payments in the city, while Shanghai’s municipal government had to rely on issuing local bonds to increase funds. These cities have been particularly affected by the economic slowdown and have had to cut back on city services and employees’ pay and benefits.
The current situation has been further exacerbated by the Chinese central government’s decision to halt all new public housing construction. As a result, real estate prices in many cities have dropped dramatically and many Chinese developers are now unable to fulfill their loan commitments. This has led to a cascade of defaults across the Chinese banking system, leading to a severe liquidity crunch.
The liquidity crunch has caused even more financial problems for Chinese cities, as they often depend on mortgages and other loans to finance their operations. This lack of liquidity has made it difficult for many cities to pay their bills and has also caused some to raise taxes in order to generate revenue.
The Chinese government has been proactive in attempting to alleviate the financial problems of its cities. For instance, in January 2021, the Chinese central government released a special fund of 100 billion yuan ($15.8 billion) to help local governments pay their bills. In the same month, the Chinese government also announced plans to issue special bonds to raise additional funds for municipal governments.
In the end, it remains to be seen how Chinese cities will be able to weather the economic storm of Covid-19 and the real estate crash. For now, Chinese cities are struggling to pay their bills and face an uncertain future.
