WUHAN, China — Thousands of retirees confronted local officials and the police outside a popular park in the central Chinese city of Wuhan to demand the repeal of recent cuts in government-provided medical insurance for seniors.
The protest on Wednesday, the second in Wuhan in a week, was the latest sign of strain on the finances of China’s local governments, which are responsible for covering much of the cost of everything from health care to heating homes. China’s “zero Covid” policies, dictated by Beijing over the past three years, saddled those localities with additional costs, while a downturn in the real estate market eroded a reliable stream of revenue.
Video footage that circulated online indicated that large crowds gathered around Zhongshan Park in Wuhan, as the police tried to divide them by imposing barricades. When police officers tried to push the crowds back, older men and women refused to back off and shouted in officers’ faces. Some protesters sang songs like “The Internationale,” an anthem employed by both the ruling Communist Party and by protesters, who have used it to suggest that the party has strayed from its ideological roots.
In Wuhan, a witness to the protest and two other residents described what they called a large demonstration during the day. By evening, a street where protesters had gathered was deserted, and four police cars were parked nearby. One of the people in Wuhan said that another protest was planned for Thursday morning.
Social frictions in China may be reappearing as economic growth slows and the population ages. China has one of the world’s highest levels of income inequality. The protest Wednesday took place near a luxury mall with street-level stores for brands like Dior, Louis Vuitton and Versace.
The protests were about China’s medical insurance system for urban residents. The system consists of two parts: a collective pool of funds and each individual’s account. As part of a restructuring of the national health insurance system, local governments are reducing the amount of money deposited into the personal accounts.
Protesters who gathered last Wednesday had vowed to return in a week if their demands that the local government restore insurance contributions for retirees to previous levels were not met.
The Wuhan government, in a document posted on its website, said that while it was true that the reforms would result in lower payments to everyone’s personal insurance accounts, ultimately there would be lower out-of-pocket expenses for certain individuals, because the collective pool would shoulder more of a person’s health care costs for routine hospital visits.
In addition to the protest in Wuhan, videos also surfaced online on Wednesday of a demonstration of retirees in the port city of Dalian, in Liaoning Province. Last month, a crowd of retirees gathered outside government offices in the southern city of Guangzhou to protest the reduction in government contributions to their personal health insurance accounts, according to videos posted online.
Alfred Wu, an associate professor at National University in Singapore who specializes in political and economic issues in China, said the protesters, many of whom are retired government workers or employees of state-owned companies, were upset at what they saw as a broken promise.
They accepted years of working for low salaries with the expectation that they would receive generous health care and pensions in retirement. Workers in China also expected to retire fairly young by international standards — by 50 or 55 for many women and by 55 or 60 for many men, though it is very common for retired older workers to take part-time jobs.
The trade-off on retirement benefits has become increasingly unsustainable in the face of China’s looming demographics challenges, in which the number of old people is growing more rapidly than that of young people entering the work force.
When Covid struck, local governments had another financial burden: paying for extensive mass testing and quarantine facilities mandated by the central government.
“The Covid measures accelerated a problem that was already looming on the horizon,” Mr. Wu said.
Local governments across China are facing financial crises. In the mid-1990s, they lost most of their ability to collect taxes because of a government policy change. They were given broad authority instead to borrow money, or to raise money by selling long-term leases of state-owned land to developers.
Sales of land leases boomed, and were equal to roughly 7 percent of the entire economy’s output in recent years. Even that money was not enough to pay for local governments’ extensive investments in roads, bridges, rail lines, urban parks and other projects. Provinces, cities and towns also borrowed very heavily, often using state-owned enterprises to do so.
A slow-motion housing crisis since the autumn of 2021 has now disrupted China’s model for local government financing. With dozens of developers defaulting on at least some of their debts, they have pulled back sharply from leasing further land. Government revenues from land transfers dropped by nearly a quarter last year.
That deprived local governments of money even as their expenses surged because of “zero Covid” policies enacted by Beijing.
Caught between falling revenues and rising costs, local governments have responded by delaying pay for civil servants and enacting broad spending cuts. Many local governments in Hebei Province, which surrounds Beijing on three sides, could not even afford to continue heating subsidies for natural gas during the winter, leaving residents to shiver during a record-setting cold wave.
Last month, hundreds of workers who had been hired for the government’s mass testing programs took to the streets to demand unpaid wages. A month prior, medical students at universities and hospitals, many of whom were pressed into duty as the country’s health care system strained to handle a flood of Covid cases, protested for better pay and more protective equipment.
Li You contributed research.