China is now free of the health restrictions that have plagued the country for three years, but the “zero Covid” page has not yet been fully turned.
China’s health policy has left financial scars, especially for Chinese municipalities and provinces. Local authorities have spent tens of billions of euros and they are struggling to recover as the figures are dizzying. There are no national statistics on the cost of “zero Covid”, but the Chinese provinces and large municipalities have published their accounts in recent days, to prepare the new 2023 budgets.
We knew that the central government had largely relied on local authorities to financially support the implementation of the “zero Covid” policy. The publication of the figures makes it possible to become aware of the magnitude of the bill. A few examples: in Guangdong province, the most populous in China with its 127 million inhabitants and its capital Canton, the Covid zero bill amounts to 71 billion yuan, that is to say almost ten Billions of Euro’s. For the small coastal province of Zhejiang, it is six billion euros. The city of Beijing, four billion. Shanghai, with its long confinement in the spring of 2022, has spent more than two billion euros. All this has made it possible to finance massive screenings, tens of billions of Covid tests sometimes carried out on a daily basis and free for the population.
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The provinces and municipalities also had to build the famous quarantine centers, the temporary hospitals, also pay the salaries of all the health personnel, all those men and women in white (the Da Bai), who were responsible for enforcing the restrictions. It was also necessary to finance vaccination campaigns. All this explains the magnitude of the bill.
Provincial and municipal finances are struggling to recover
The Covid bill is causing heavy deficits at the local level. With dangerous consequences: some provinces like Zhejiang have had to dip into health insurance funds, at the risk of destabilizing the health system. Other communities sold bonds. A deficit also aggravated by the drop in tax revenue in 2022, since companies in difficulty by the epidemic have paid less tax. The real estate crisis has also reduced municipal revenues generated by land sales.
In the end, all cumulated, according to an estimate by the Bloomberg channel, China’s deficit between January and November 2022 reached a record, at more than 1,075 billion euros. The Chinese provinces hope that the recovery of the economy, after the lifting of health restrictions, will allow them to cope with this unprecedented situation. Several provinces expect a 5% increase in revenue in 2023, thanks to a recovery in growth.