Government institutions, state-owned enterprises, and private companies across China are implementing widespread salary reductions as the country grapples with deteriorating economic conditions. From Beijing to Zhejiang province, workers across all sectors are tightening their belts, creating a chain reaction that has severely damaged consumer confidence.
Central state-owned enterprises have been particularly affected. At China International Capital Corporation (CICC), employees report building-wide salary cuts, with even entry-level staff facing 5% reductions. Twenty-seven central financial enterprises have implemented compensation caps limiting annual salaries to 1 million yuan, with middle and senior management potentially seeing their pay cut in half.
A Beijing state enterprise employee revealed his company has conducted two rounds of salary cuts and layoffs since 2023, eliminating meal and transportation subsidies while reducing staff by 5-20% depending on position. Workers now handle responsibilities previously shared among multiple employees.
In Zhejiang province, civil servants are experiencing significant pay reductions. Regular civil servants reportedly lost 50,000-60,000 yuan ($6,965 – $8,358) annually, while department-level officials saw cuts of 80,000-100,000 ($11,144 – $13,930) yuan, and higher-ranking officials faced reductions of around 150,000 yuan ($20,895). This follows previous cuts implemented in recent years.
Local government finances are under severe strain. In Shandong, some township officials receive only 70% of their salaries with delayed payments. A county-level official reported that no land sales have occurred in two years, leaving the local government unable to pay basic expenses like vehicle rentals and employee reimbursements.
The salary cuts have created a deflationary spiral affecting the broader economy. Pork prices have plummeted, with premium ribs selling for just 12 yuan ($1.7) per kilogram. Restaurants are desperately cutting prices to survive, while small supermarkets engage in destructive price wars.
Families have dramatically reduced spending, switching to cheaper brands and cutting entertainment expenses. One Beijing resident reported reducing family restaurant visits from 2-3 times weekly to once per week.
Despite official claims of “overall stability” in Q1 2025, regional fiscal data tells a different story. Zhejiang’s public budget revenue grew only 0.2% year-over-year, with tax revenue actually declining 0.3%.
An economist warned that China faces a top-down “austerity chain” where government budget constraints cascade through society, destroying both consumer motivation and business confidence. He cautions that if current conditions become permanent rather than temporary adjustments, social resilience and confidence will face their ultimate test.
Source: Radio Free Asia, June 17, 2025
https://www.rfa.org/mandarin/shangye/jingji/2025/06/17/china-economy-business-failure-lower-salary/