China's regional and local governments (RLGs) facing Henan's worst floods in decades can absorb the immediate costs given likely support from the central government, says Moody's Investors Service in a new report. However, more frequent and severe climate disasters point to rising costs to lives, property, and infrastructure.
"The unusual intensity and duration of heatwaves and rainfall across China in recent years highlight longer-term climate change risks. In particular, fast-growing and low-lying urban centers will face progressively bigger fiscal burdens to mitigate natural disaster costs over time," says Jack Yuan, a Moody's Assistant Vice President.
In the four days through 20 July, heavy downpours almost equivalent to the annual average rainfall inundated Zhengzhou, the capital of Henan province in central China (A1 stable). Zhengzhou is one of several cities in the province that faced torrential rain in July, triggering Henan's worst floods in decades and a tragic loss of life, as well as damage to property and infrastructure. Direct economic costs were over RMB1.2 billion ($185 million), according to state-owned media.
Moody's expects the Henan province's operating deficit to remain elevated over the near term because of lost revenue and higher government expenditure associated with disaster recovery. The provincial government has allocated RMB43 million of its RMB200 million disaster relief funds to Zhengzhou. The central government contributed half of the total relief package.
Climate change will increase pressures for disaster-related infrastructure to mitigate the effects of such extreme weather events. The State Council issued a statement on 22 July urging enhanced flood prevention and control capacity as well as the construction of more "sponge cities", designed to absorb and capture rainwater and to improve the ability to respond to environmental changes and natural disasters caused by rain.
Subscribers can access the report "Regional and Local Governments – China: Flooding points to climate change risks and continued disaster-mitigation spending" at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1297317
