argumate:

China’s Economy Tested by Strained City Finances

Pettis says that rebalancing the growth model is going to require local governments to foot the bill by liquidating assets, but naturally they’re reluctant to do that and they’re responding to financial pressures by raising fees and cutting salaries, which will only suppress consumption even further:

Some have already slashed income for civil servants. In July, a district in Shenzhen said it plans to cut 650 million yuan ($96 million) in spending on bonuses and subsidies for employees at government entities and state-owned organizations, while it redirects more than 600 million yuan to Covid testing and other Covid-related expenditures.

I assume eventually when push comes to shove and a city defaults on its debts then the central government will be forced to step in, but then what?