Caixin Explains: How Severe Are Chinese Local Governments’ Budgetary Troubles?

China’s economic slowdown has not only stymied industry and disrupted daily life, but also has been draining local governments’ coffers. This has become a prominent issue for the country’s fiscal security.

Costly Covid-19 containment measures are among causes of increased government spending, while the prolonged property market crisis has caused land sales to nosedive, robbing localities of a primary source of income. A new policy that requires them to hand out more tax refunds to businesses has also thinned local fiscal revenues.