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Comment by culi | Hacker News Reader

> Chinese state employees not having been paid for 8 months

I haven't heard of this before. Do you have a source (pref. one that doesn't start with "radio free" haha)? China's a massive country and "Chinese state employees" can mean all sorts of things

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There's a liquidity issue for some heavily in debt local governments. It's also much complex because central government is taking this as a chance to pushing unwelcome structural changes. There's a quick fix have been done before - central government can simply swap local with central government debt and they still have a lot of fiscal room to do so. But many economists are against the approach this time because there's a issue long aware that central government doesn't actually able to control local government's budget but their debt considered backed by central government's unlimited credit.

What make things worse is the political incentive is local government has to grow economy and they can achieve that by borrowing money for investment. Even if the investment return is almost 0 there's a short term GDP boost (just think it as giving money to local workers, similar to Civilian Conservation Corps).

So now what they are pushing is force local government sell unused state assets they owned, cutting civil servant (hurting local consumption and local GDP), limiting their borrowing capacity and all other government reforms. Most importantly they want to break the expectations that local government debts are back by central government which distorted the market a lot in past decades.

Localities are having cashflow issues, since all the VAT basically goes to the central government and without property taxes they rely on land transfer taxes. That could be playing out harshly in lower tiered cities, but I honestly have no idea what is going on ATM.

Any claim about china has to be prefixed with some at least, since there are lots and lots of people.

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