(Yicai Global) July 10 -- Millions of residents of Baoding, the fourth-richest city in terms of government revenue in Hebei province, are left to their own devices after a local bus operator said that some routes are suspended due to financial difficulties caused by the Covid-19 pandemic and reduced subsidies.

Because of financial tensions, Baoding Public Transport has been unable to replace the batteries of electric buses with expired warranties so not all routes can be resumed for now, the state-owned company said in a statement recently.

Baoding Public Transport is in charge of operating more than 100 bus routes in the city with a population of over 10 million people. Based on public data from 2020, the daily average ridership is 400,000 passengers.

The firm considers first reopening 23 routes in urban areas to satisfy residents' demand, it said in response to citizens' questions on the local government's website.

Bus ridership in the northern city has plummeted since the early 2020 Covid-19 outbreaks so ticket revenue has fallen below 30 percent of normal levels, which means extreme working capital pressures, the company said in a statement last week. The problems have been evident since last year as in November, the firm suspended eight routes.

Baoding is not the first Chinese city to report halted bus routes in recent years as Henan province’s Shangqiu, and Heilongjiang’s Mohe have also had similar issues.

Since the pandemic, the dropping ridership, increasing costs, big decreases in electric vehicle subsidies, and a reduction in government allowances have caused the shrinking or suspensions of bus routes in some Chinese regions, Cai Shaoqu, an insider at the Ministry of Transport, said to Yicai Global.

Public transport is akin to public welfare, Cai said, adding that the operating cost of Baoding’s public transport is between CNY6 and CNY7 (USD1) whereas one ticket costs CNY1 or CNY2, which means the gap needs to be filled by government funding. China has cut its nationwide electric bus subsidy to around CNY10,000 (USD1,382) from about CNY70,000.

The news has drawn attention to municipal debt risks. However, among Hebei's 11 prefecture-level cities, Baoding’s public budget revenue ranks fourth. Last year, the city increased its fiscal revenue by 1 percent to about CNY31.6 billion (USD4.4 billion). Even in 2021 and 2020, the surplus rose slightly.

In the first quarter, Baoding’s revenue exceeded expectations by tallying CNY12.3 billion, equaling over 36 percent of the prediction for the entire 2023. The sum for the first quarter was almost 10 percent more than that of a year ago and higher than the national growth rate of 5 percent.

Still, the municipal government said in its 2023 budget report that Baoding's structural contradictions and deep-seated problems, which have accumulated for a long time, are very prominent.

County-level financial resources are insufficient, and the revenue structure is not optimized so debt risks intensify, the government said, adding that expenditures in industrial upgrading and rural revitalization have significantly increased, resulting in the unprecedentedly sharp contradiction between fiscal revenues and expenditures.

This year, Baoding’s fiscal revenue is predicted to grow by about 7 percent to about CNY33.8 billion from a year ago, per the report. Its balance of government debt totaled around CNY137.6 billion (USD19 billion) last year, under the quota of about CNY145.1 billion, indicating controllable risks.

Editors: Shi Yi, Emmi Laine