China’s policies aimed at easing the financial burden on companies struggling to cope with the coronavirus epidemic could end up putting additional fiscal pressure on many provinces as some measures are likely to deprive them of much-needed income, reported Caixin.
Hubei, the province at the epicenter of the outbreak of the new coronavirus, is particularly vulnerable and concerns have grown that temporary exemptions on contributions to provincial social insurance funds may compromise its ability to pay pensions and unemployment benefits to the local population.
Hubei’s pension fund was already under pressure even before the emergence of the epidemic. As a region with a population outflow as working-age people moved to other provinces to work, its annual pension payments exceeded contributions into the fund for three consecutive years from 2016 to 2018, according to data compiled by CEIC, a financial and economic data provider.
When officials presented their 2020 budget to Hubei’s People’s Congress in January, the fund was projected to suffer a 96% plunge in its cash surplus for the year to RMB 210 million ($30 million) based on a 4% increase in income to RMB 250.1 billion and a 7.1% jump in expenditure to RMB 249.9 billion.