[The Epoch Times, March 22, 2022](Reported by Li Siqi, a reporter from the Epoch Times Special Department) The CCP official said on March 19 that many provinces in China are facing the situation of “multiple cities at the same time”. On March 18, the National Bureau of Disease Control and Prevention of the Communist Party of China made it clear that the “dynamic clearing” policy is in line with China’s national conditions, but professional analysts pointed out that continuing “dynamic clearing” will make the local finances that are already difficult even more strained.
As of March 19, China’s cumulative vaccination has reached 3.223 billion doses. As of March 18, the complete vaccination rate of people over 60 years old was 80.27%. High-dose vaccination has failed to relieve the pressure of the rapid spread of the current domestic epidemic in China. The CCP officially announced on the afternoon of March 19 that the local epidemic situation in China is still in the developing stage, and it is necessary to achieve “dynamic clearing” as soon as possible; and the number of newly diagnosed patients in Hong Kong has recently reached 20,000 to 30,000 per day.
On the evening of March 20, CCTV News reported Liang Wannian’s latest interpretation of “dynamic clearing”. Liang Wannian is the head of the expert group of the China Epidemic Response Leading Group, which is affiliated with the National Health Commission of the Communist Party of China. Liang Wannian said that “dynamic clearing” has two meanings, one is the ideal state of no patients, and the other is that once there is an epidemic, it must be “quickly identified” and “killed in the bud”.
Liang Wannian introduced that antigen testing and nucleic acid testing should be arranged to complement each other in order to detect the epidemic as soon as possible. He said that the virus is “race to us” and described the Western concept of “coexisting with the virus” as “laying down”, that is, inaction. However, no matter what kind of testing can’t avoid the problem of testing funding sources.
Based on China’s current requirement of 48-hour nucleic acid testing to pass, usually large-scale nationwide nucleic acid testing ranges from three rounds of testing to six or more. Taking Zhengzhou as an example, from January 3 to 11 this year, Zhengzhou completed four rounds of nucleic acid testing for all employees (more than 12 million people) and six rounds of nucleic acid testing for key populations. The testing cost per person is estimated to be 24 yuan (about $3.8) to 48 yuan (about $7.7), which is a considerable sum.
Can China’s local finances currently bear the cost of “dynamic clearing”?
On March 21, Albert Song, a political and economic researcher at Tianjun, told The Epoch Times that China’s local finances are under great pressure. The intensification is becoming more and more obvious.” Song Weijun has 27 years of experience in China’s financial industry, focusing on research in China’s political and economic fields.
He said: “I have received some information that some local governments want to make the epidemic bigger and force the central government to issue a relaxed epidemic prevention policy, not ‘clearing’, so a new word came out called ‘dynamic clearing’, and it is estimated that the follow-up epidemic prevention policy It will be slowly released, because this model has proven to be unworkable around the world.”
Conflict between central and local finances is becoming increasingly acute
This year, local finance has already been stretched thin, which can be seen from the scale of new loans issued and the dependence of local finance on central finance. The CCP generally determines the scale of new debt each year after the two sessions, and then gradually issues it from the central government to the provinces and cities, and then to the counties and districts. The real bond issuance has to wait until May or June. However, due to financial constraints in recent years, in mid-December last year, it was determined that 1.788 trillion yuan of new debt had been added, and about 70% of it has been issued so far. Secondly, Li Keqiang’s recently released “2022 Government Work Report” stated that the transfer payment from the central government to local governments increased by 1.5 trillion yuan (about 240 billion US dollars), and the scale was nearly 9.8 trillion yuan (about 1.6 trillion US dollars).
Due to local corruption or ingenious projects, the local financial expenditure is large and has been unable to make ends meet. Every year, only eight provinces and cities are in a better financial situation, and the others are not good; therefore, the central government will take away the tax revenue that exceeds the needs of the central government, and then the local government will get the central government The returned funds, this is the “transfer payment”.
Song Weijun explained that the central government controls local governments through “transfer payments”. “The central government’s centralization in recent years is characterized by ‘financial power is raised, and administrative power is devolved’. The central government has seized financial power, and the control ratio has reached 70%, but the power to handle affairs has been delegated. So for local governments, they do more things, but take The money received is less, and we have to rely on the ‘transfer payment’ from the central government.” “This has been the focus of the recent conflict between the central and local finance.”
The pressure on China’s local finance can also be judged from the two aspects of taxation and land transfer fees. The CCP’s financial department has four accounts, the two most important being the general public budget (the source of tax revenue) and the government fund budget (the source of land sales revenue, that is, land transfer fees, commonly known as land finance). It took the central government about six years to suppress the property market, and the local governments were very dissatisfied, because the land sales revenue declined and the local finances were tight.
The “zero-clearing” policy has put a lot of pressure on local finances. Last year, local finance was in a state of substantial bankruptcy, and financial support could not continue, even wages could not be paid, not to mention the shortage of social security funds, and rigid expenditures in rural areas all needed financial sources.
Song Weijun said: “Now the economy is declining, tax revenue is not rising, the real estate market is not active, land finance is not improving, and the financial pressure on the central and local governments is relatively large. At present, the contradiction between the central and local finance is becoming more and more intensified. more obvious.”
The “Financial Blue Book: China’s Fiscal Policy Report (2021)” released by the Chinese Academy of Fiscal Sciences on August 18, 2021 disclosed that in 2025, the fiscal gap will be about 10.65 trillion yuan (about 1.7 trillion US dollars).
Shanghai’s epidemic prevention measures have changed
Although Wang Hesheng, deputy director of the Chinese Communist Party’s Health Committee and director of the National Bureau of Disease Control and Prevention, said on March 18 that the effect of “dynamic clearing” is good, “although the prevention and control measures of ‘dynamic clearing’ will affect production and life in some areas. There will be some impacts, but these impacts are short-term and limited in scope.” But Wu Fan, a member of the Shanghai Epidemic Prevention and Control Expert Group, said on the same day that Shanghai’s “playing style has changed.” Wu Fan is also the Vice Dean of Fudan University School of Medicine.
Wu Fan said that in a sense, Shanghai was “forced” out by not closing down the city and not suspending the city today. Because “Shanghai is not only Shanghai for Shanghainese, but also Shanghai for Chinese people. Its importance to China’s economic and social development is irreplaceable, and it will even affect the overall situation of the international economy.”
Shanghai is a mega city with a population of nearly 30 million. Wu Fan said that if Shanghai’s container ports are closed, many international trade in goods will be implicated; if the city is closed for a week or ten days, it will be beneficial to slow down the epidemic, but from the perspective of economic and people’s livelihood, many small and medium-sized enterprises, migrant workers Everyone has to stop work, and all kinds of losses are too great to bear.
Regarding the severity of the epidemic in Shanghai, Wu Fan said, “The number of cases in the past is only the tip of the iceberg”, and now he has to “cover the bottom of the iceberg” to know the specific situation. She made it clear that the number of infected people in Shanghai will continue to increase in the short term; at the same time, she also lamented that Shanghai’s disease prevention and control personnel and grassroots prevention and control personnel have been “too tired.”
Wu Fan believes that Shanghai is currently trying to explore a new way of epidemic prevention and control – the city’s operation will not stop, and through grading and classification, it will achieve a “dynamic clearing” of the society.
Responsible editor: Lian Shuhua#