China’s economy is struggling to recover after prolonged Covid lockdowns that hit major sectors.  

Xie Tian, a professor at the Aiken School of Business at the University of South Carolina, told VOA that China is facing three major crises: manufacturing contraction due to the Covid control policy, financial distress, and real estate crisis.

Salary cuts for civil servants in multiple provinces 

According to VOA, a series of salary cuts have been reported in many provinces. In Yantai City, Shandong Province, hundreds of teachers gathered in front of the senior high school in the Yantai Development Zone protesting. The teachers said that not only had the bonuses not been paid in the past two years, but   they were also required to return the income of 50,000-100,000 yuan (7,500 to 15,000 dollars) that had been paid to them.

Shenzhen, a place that has always attracted master’s and doctoral students from famous schools to become teachers with high salaries, has also reported salary cuts. Previously, many schools in Shenzhen offered 280,000-300,000 yuan salaries (42,000 to 44,700 dollars) for graduates with masters and doctoral students, plus bonuses and allowances. Since March, many Shenzhen teachers have posted on the Internet that their year-end performance bonuses would be reduced by 60%. Some people’s salaries have been directly reduced to 80,000-100,000 yuan (12,000 to 15,000 dollars).

Teachers’ salary cuts in Shenzhen and Yantai are not unique. Caixin reported on June 21 that since the beginning of this year, teachers’ salaries in many places have frequently been reduced. Teachers in Xiamen, Suzhou, and other places have reported that some of their allowances and bonuses have been canceled.

On June 29, Caixin reported that civil servants in many coastal areas have successively encountered a wave of salary cuts. Their benefits, bonuses, and allowances have been canceled, and the basic salary has been reduced by 20% or 30%. 

This wave of wage cuts has greatly affected civil servants in coastal areas, especially in Guangdong, Zhejiang, Jiangsu, and other places. The article, “Salary Cuts for Civil Servants in Many Coastal Areas,” was deleted shortly after publication.

The decline in real estate has caused enormous financial pressures

The National Bureau of Statistics of China released official data on June 15, stating that from January to May this year, China’s commercial housing sales area and sales volume fell by 23.6% and 31.5%, respectively. In addition, the new housing construction decreased by 30.6% in the first five months.

According to Apollo News, Shen Xuefeng, a researcher at Far East Credit, a Shanghai-based appraisal agency, published a report in April titled “Revenue from land transfer and local fiscal sustainability.” The report found that in the past three years, the average sales price of newly built commercial housing in the country has continued to decline, and it may be difficult for the price of land transfer to rise.

The report pointed out that in 2021, the proportion of land transfer revenue to local fiscal revenue was as high as 41.47%. The authors said: “In the case of a high proportion of land transfer revenue to local government revenue and expenditure, if this part of income is significantly reduced, it may have an impact on local finances.”

Local governments across China face fiscal crises

In late May, Premier Li Keqiang held a meeting about the downtrend of the economy and proposed measures to tackle the problems. The meeting offered multiple economic measures, including tax rebates, tax cuts, social insurance delays payments, among others.

VOA cited data released by the Ministry of Finance on June 16; in the first five months of this year, the budget revenue of the central government was about 22 billion dollars, an increase of 3.5% over the same period last year. The local government budget revenue was 305 billion dollars, down 27.6% from a year ago. Among them, the income from the land revenue was 277 billion dollars, down 28.7% from the same period last year.

At a press conference held by the Ministry of Finance on June 2, Wang Jianfan, director of the Budget Department, said that funds from the central government to local governments this year reached nearly 1.46 trillion dollars, an increase of about 220 billion dollars over the previous year, largest in the past year.

In several provinces, local governments have to cut their budget spending as the central government tightens debt limits.

In Chongqing, the local government announced its plans to budget spending by 5 billion yuan (745 million dollars).

In Suzhou, the local government also adjusted its budget for the year. The provincial government plans to issue bonds to increase funds to compensate for the reduced budget. 

Sign up to receive our latest news!

By submitting this form, I agree to the terms.