Michael Pettis
Michael Pettis

@michaelxpettis

4 Tweets Jan 07, 2023
1/4
This probably shouldn't come as a surprise, but part of the proceeds from special purpose bonds, which are designated mainly to support local infrastructure projects, are instead being used to fund local operations and payroll.
sc.mp via @scmpnews
2/4
Local governments have been squeezed between rising costs and rapidly falling revenues, and many of them have been forced to cut back on local spending and wages. That's why it isn't at all surprising that they may be diverting SPB proceeds towards funding operating expenses.
3/4
But while this may be a "misuse" of the funds, it's not necessarily a bad thing. Paying wages and local operational expenses is often a much better way to support local demand than building more transportation and logistical infrastructure.
4/4
It may well be that keeping existing local-government spending in place is better at creating domestic demand than starting new, and unnecessary, infrastructure-spending projects.

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