China’s zero-Covid strategy, tumbling tax revenue put local government services and jobs under threat

The suspension of public transport services and delayed salary payments to civil servants have sparked concern about the fiscal condition of local governments

Stringent coronavirus controls, falling revenue from land sales and Covid-related tax cuts are coming at a huge cost to cash-strapped local governments

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Stringent coronavirus controls such as mass testing have become a huge burden for local governments. Photo: Xinhua

Published: 7:00am, 21 Aug 2022Updated: 1:37pm, 21 Aug 2022

The cost of China’s zero-Covid policy coupled with declining fiscal revenue is putting enormous financial stress on local governments, forcing some authorities to slash public services and delay payments to civil servants, while threatening the operation of hospitals.

The recent suspension of bus services in two towns has sparked concern about a rolling back of essential services in China, as local government finances have become increasingly precarious.

Dancheng, a town with a population of 1.06 million in central Henan province, suspended bus services last Friday.

“The bus company has difficulty operating, and the drivers’ salaries have not been paid for several months, which has led to the services suspension of all urban buses,” said the county’s public transport company in a notice, which was later deleted from its official WeChat account.

Meanwhile, multiple bus lines in Boluo county, Guangdong province, have also been slashed or suspended due to financial stress, according to a Caixin report on Sunday.

Stringent coronavirus controls such as mass testing have become a huge burden for local governments, who are also facing tumbling revenue from land sales due to a slump in the property market, as well as tax cuts and rebates to rescue their economies from Covid-19 outbreaks.