China

China’s Provinces Splashed $50 Billion on Covid Curbs in 2022

Analysts say the huge cost of China's contentious 'zero-Covid' policy was a key reason that provincial leaders were happy to suddenly end the unpopular restrictions late last year. China Daily image via Reuters.

China’s provinces spent over $50 billion on Covid restrictions last year as economic growth slowed, annual budget reports from local governments said.

Of China’s 31 provinces, regions and municipalities, at least 20 have disclosed their expenditure on fighting the pandemic in 2022, with rich provinces spending the most.

China’s biggest provincial economy, Guangdong in the south, spent 71.14 billion yuan last year, including vaccinations, PCR testing and subsidies for medical staff. The figure, the largest among the 20 provincial economies, was up nearly 57% from Covid-related spending in 2021 and more than double 2020’s outlays.

That sent the total counter-pandemic spending of the economic powerhouse to 146.8 billion yuan over the past three years.

When China reopened its borders on January 8 after three years of sticking to a strict “zero-Covid” regime, state media Xinhua News Agency reported that “it has become difficult to eliminate the coronavirus, and the social costs and price of Covid prevention and control were rising.”

And that was likely a significant under-statement.

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Economic Woes

Stagnant state land sales revenue has also exacerbated local governments’ financial woes, which were eroded by China’s feeble growth, weak tax income and stringent Covid restrictions.

Analysts at Moody’s expect negative credit conditions for local governments in 2023 because of ongoing weakness in land sales revenue, persistently high fiscal deficits and continued growth in direct debt and contingent liabilities, but a progressive economic recovery and smaller tax cuts will support a pickup in their general budgetary revenue.

The eastern coastal province of Jiangsu, the country’s second-biggest provincial economy, spent 42.3 billion yuan handling the pandemic last year, 28 times more than in 2021.

The commercial hub of Shanghai, whose lockdown in April and May last year weakened the national economy, spent 16.77 billion yuan combating Covid, including medical treatment, construction of makeshift hospitals and medial equipment purchases.

Beijing, which suffered two major Covid outbreaks last year, said it dedicated around 30 billion yuan on prevention and control and plans expenditures of 32.77 billion yuan for 2023 public health, with a focus on securing the operation of medical services and people’s health.