China’s coronavirus-induced economic slowdown forces local governments to slash spending
- Several local authorities have recently reduced their revenue targets for the year, citing the property market slump, tumbling tax takes and Covid-19 outbreaks
- Naan district in Chongqing will cut budgeted expenditure by 229.87 million yuan, saying the slowing economy is putting ‘unprecedented’ pressure on finances
A slump in the real estate market and China’s strict coronavirus containment policy are forcing some local governments to scramble for new sources of revenue and cut spending amid mounting economic pressure.
Several local authorities have recently revised down their revenue targets from the start of the year, citing poor performance in the property market, tumbling tax takes, Covid-19 outbreaks and natural disasters as key reasons.
Samuel Kwok, head of international public finance for Asia-Pacific at Fitch Ratings, expects fiscal deficit and debt levels among local governments to grow in the coming months.
Our assumption is revenue is still stable but expenditure will stay high to support [the] economy
“Our assumption is revenue is still stable but expenditure will stay high to support [the] economy,” Kwok said, adding that central government fund transfers to local authorities may even decline next year.