On Tuesday, December 27, 2022 at 2:14:21 PM UTC+8, David P. wrote:
> Does Zero Covid’s End Mean China Is Running Out of Money?
> By Simone Gao, Dec. 20, 2022, WSJ
>
> Whether or not it chooses to admit it, the Chinese Communist Party clearly has terminated its zero-Covid policy. While much of the reporting on this issue has stressed the recent protests as the cause for this dramatic policy change, there may be a simpler reason: The Chinese government is running out of money.
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> The foundation of China’s zero-Covid policy has been ubiquitous nucleic-acid testing. Before Dec. 7, a 48-hour negative test certificate was required to access most public places throughout China. That costly policy wasn’t conducive to the long duration of this pandemic. Signs of financial wear began to show on May 26, when the National Medical Insurance Administration announced that from that point on local governments would be responsible for the cost of testing. Until that announcement, the central government had borne the financial burden.
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> How great an obligation would that have been for the Chinese government? According to a report by the Bank of China, if such testing covers 900 million Chinese people, the annual cost would be $100 billion. The research branch of a private financial company in China, Soochow Securities, calculated a much higher number. Based on its report, if all first- and second-tier cities in China—a population totaling 505 million—implemented nucleic-acid testing, the annual cost would exceed $240 billion.
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> Let’s put that number in perspective. The fiscal revenue of the Chinese government in 2021 was nearly $2.9 trillion. That means testing in China’s largest cities would cost about 8% of the country’s annual fiscal revenue. And testing isn’t even the most expensive part of China’s zero-Covid policy. The bill for partial lockdowns is higher.
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> Soochow Securities research shows that the estimated cost of a 2-week partial lockdown of cities across the country every month would total $22.4 billion, the annual cost will amount to $268 billion, or more than 9% of China’s annual fiscal revenue, if lockdowns were persistent.
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> Once Beijing shirked the fiscal burden of Covid testing, local government budgets began to feel the strain. They are currently running sizable deficits due in large part to the collapse of the real-estate industry as a direct result of Xi Jinping’s policies.
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> China’s local governments are financed by the real-estate industry. The country’s official data show that in the past 10 years land-transfer fees, which are paid by real-estate developers to local governments, have generally accounted for more than 40% of local fiscal revenue. That number was 41% for 2021.
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> Land sales were the core of China’s real-estate market and helped to create one of the biggest bubbles in the world economy. To deflate that bubble, Mr. Xi issued policies at the end of 2020 that halted the rise of housing prices and restricted loans to real-estate developers. This has devastated finances of local governments. Premier Li Keqiang told 100,000 Party cadres at a teleconference in May that local governments are on their own: “I am here to let you know the bottom line. There is a reserve fund managed by the premier for natural disasters. Other than that, municipalities must manage to raise funds on their own.”
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> Beijing’s loosening its Covid restrictions will help restore a semblance of normal social order and strengthen the economy to a degree. The catering, travel and entertainment industries are likely to see big gains first, but they won’t lift the economy much. Real estate, the backbone of China’s economy, might still struggle to recover.
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> In mid-November, Beijing issued sweeping directives in an attempt to rescue its property sector. The 16-point plan developed for financial firms aims at boosting the real-estate market through measures ranging from addressing developers’ liquidity crisis to loosening down-payment requirements for home buyers. Authorities will also allow developers to access more money from home presales, the industry’s most important source of funds. But industry expert Bruce Pang told Bloomberg that “the policy support is focused on completing and delivering presale homes, leaving developers with few funding channels for new projects.”
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> This partial bailout of the real-estate industry is likely insufficient to remedy the fiscal crisis. China has built far more houses than its citizens are able and willing to purchase. In the past, the Chinese viewed property as a key investment channel. Now that belief has vanished. Chinese people understand that the golden age of real estate is gone, and as China’s population continues to shrink, the real-estate market will shrink with it. Without real estate, China’s high growth will likely come to an end despite the abandonment of zero Covid.
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> Ms. Gao is a journalist and host of “Zooming In With Simone Gao,” a current-affairs program on YouTube.
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> https://www.wsj.com/articles/is-china-running-out-of-money-ccp-zero-covid-testing-local-government-cost-real-estate-presales-11671526749

China will not run out of money as economy has rammed up soon after covid control has been removed in November 2022. However, the lifting of covid control has increased the infection rate that now has impacted the rise in the economy. As the infection cases continued to rise to its peak, there will be slowdown in the economy too. This year 2023 will be a rough year in China. New variants XBB and BA.5 spreading around the world will also impact the economy of the world too. People around the world should moderate their lifestyle expenditure and expect job turnovers too. Their country's covid situation has to be calibrated and managed well too.