City and provincial authorities spent huge amounts to maintain the country’s zero-COVID policy from mass testing to enforcing quarantines, while tax revenues dropped due to regular, strict lockdowns. Governments have responded by cutting civil servant pay, paring back public transport, and even reducing heating subsidies, CNN reported.
Debt burdens are spread unequally, with powerful economies such as Shanghai and Guangdong less at risk. Local government financing has become more transparent in recent years, but remains nepotistic, the China-focused think tank MacroPolo wrote in a recent analysis: “These dynamics can lead to contagion.”
