Shenmu mass incident reveals problems in finance

A mass incident happened in Shenmu, Shaanxi province, after rumors that free education and medical services might end, said a column in Beijing News (excerpts below).

Tens of thousands of people gathered outside the local government on a false rumor that free education and medical services might be scrapped.

According to the 2013 budget, the county needs income of 23 billion yuan ($3.74 billion), 4 percent higher than last year.

It looks as if this target will be difficult to reach.

The local government said everything is OK, but considering the situation it is too early to predict if the public are justifiably concerned.

Shenmu is not alone in feeling the pinch.

It is a coal-rich county. Many counties without any resources might feel deeper effects of the economic slowdown.

The root problem lies in improper systemic arrangements. County-level finances are often fragile when the economy experiences ups and downs because a large part of tax revenues must be submitted to higher level governments.