Hong Kong CNN  — 

China’s government, strapped for cash after years of enforcing a costly zero-Covid policy, is cutting medical benefits and planning to raise the retirement age, in deeply unpopular moves that are fueling widespread public anger.

Thousands of elderly people have been taking to the streets since January to protest big cuts to monthly medical benefit payments. They’ve gathered in four major cities across the country, demanding local officials reverse the decisions.

The changes are part of a national overhaul mainly intended to cover deficits in public medical insurance funds, according to analysts, which have been drained after paying for mass testing, mandatory quarantine and other pandemic controls over the past three years.

The demonstrations, dubbed by Chinese media as a “gray hair movement,” are another rare rebuke for authorities after widespread protests gripped the country in November against Covid lockdowns.

The anger could further undermine trust in the Communist Party already damaged by Covid lockdowns, banking scandals and a real estate crisis.

“Chinese pensioners view these latest reforms as yet another broken party promise, one that could profoundly impact their quality of life in the face of China’s looming demographic crisis,” said Craig Singleton, senior fellow at the Washington-based Foundation for Defense of Democracies.

Chinese officials appear to be worried that these protests could spread further.

Censors removed hashtags for “Wuhan health insurance” from Weibo’s hot topics section after the demonstrations began in January. They also censored photos and videos of the protests from social media. 

Fueling the anger is a new drive by Beijing to push back the retirement age for all workers.

Dire finances

For nearly three years, local governments bore the brunt of enforcing the now-defunct pandemic controls, resulting in soaring expenditures even as their income from revenue sources such as land sales slumped.

The concerns were sparked after Guangdong province and the city of Dalian announced in 2022 that they would tap public medical insurance funds to pay for mass Covid testing.

The issue was exacerbated when, shortly after, the National Healthcare Security Administration (NHSA) said the money shouldn’t be used in this way and that local governments should fund the testing with their own budgets.

State media reported at the time that some other regions had already spent public money on mass testing. The reports triggered fears about the future sustainability of the already underfunded health insurance system.

It’s unclear exactly how much China has spent in total on maintaining its ultra-strict zero-Covid policy, or where that money came from. But at least 17 of the country’s 31 provinces have revealed the enormous sums they’ve spent on fighting the pandemic.

Guangdong, the richest province in China, was the biggest spender. It spent 711 billion yuan ($10.3 billion) in 2022 on measures such as vaccination, testing and emergency benefits for medical workers, an increase of more than 50% from the year before.

Zhejiang and Beijing spent 43.5 billion yuan and 30 billion yuan respectively.

“Local governments are running short of money, or in some cases, out of money,” said George Magnus, an associate at the China Centre at Oxford University.

“Funding zero-Covid was the most proximate cause for the crunch, but local finances are deteriorating for other reasons too, notably the rising burden of expenses associated with age-related spending.”

Interest costs on trillions of dollars of debt and falling revenues from land sales have also worsened government finances, he said.

China’s outstanding government debts might have surpassed 123 trillion yuan ($18 trillion) last year, of which nearly $10 trillion is so-called “hidden debt,” according to Chinese analysts. The debt problem has gotten so extreme that some cities are unable to provide basic services, such as heating homes.

A man undergoes a Covid test in Shanghai on January 7, 2023. China's government is strapped for cash after years of enforcing its costly zero-Covid policy.

Covering the shortfall