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Pay Cuts and Hiring Freezes as Fiscal Deficits Plague Local Governments

The government of Hegang, a city in China’s northwestern province of Heilongjiang, announced on December 23 that, “Due to the fiscal restructuring plan, the financial situation has changed significantly.” As a result, the city government of Hegang decided to suspend the recruitment of grassroots-level staff.”

The web announcement, according to the mainland newspaper National Business Daily, shows income has shrunk. The result is an ever-widening gap between revenues and expenditures. Debt financing has become the survival mode for some local governments.

As of October 2021, the balance of total local government debt in China reached 29.65 trillion yuan (US$ 4.65 trillion). Only five provinces – Shanghai, Guangdong, Beijing, Zhejiang and Jiangsu – have a debt-over-GDP ratio below the red line of 100 percent. Four provinces, including Qinghai, Heilongjiang, Ningxia and Inner Mongolia, have local debt ratios over 300 percent, with Qinghai being above 500 percent.

Days ago, the Hong Kong media also reported that a number of provinces and cities in China have cut the pay of civil servants at a rate between 20 and 30 percent.

Source: Central News Agency, December 28, 2021