China’s land sale revenue has plummeted to its lowest level in a decade as the country’s housing market continues its prolonged downturn, forcing the government to increase fiscal spending to stimulate the economy and widening budget deficits in the process.

According to data released by China’s Ministry of Finance on June 20, land sale revenue in May dropped 14.6% year-on-year to 194.1 billion yuan (approximately $27 billion), marking the lowest level since May 2015. This decline contributed to a reduction in total government revenue to 11.2 trillion yuan (approximately $1.6 trillion) for the first five months of this year.

The persistent weakness in land sales highlights the ongoing struggles in China’s real estate sector, which has become one of the primary drags on the country’s economic growth. The situation has been further complicated by increased U.S. export tariffs, adding additional pressure to local government finances and limiting their ability to drive economic growth through expanded investment.

Goldman Sachs economists maintained their forecast that China’s land sale revenue could decline by an additional 5% to 10% this year, noting that real estate construction and investment have yet to reach bottom.

Meanwhile, Chinese authorities are increasing spending at the fastest pace in three years to stimulate economic growth, including providing more subsidies for trade-in programs for consumer goods. Total fiscal expenditure jumped to 14.5 trillion yuan ($2.0 trillion) in the first five months, resulting in an expanded overall budget deficit of 3.3 trillion yuan ($0.46 trillion).

Goldman Sachs analysts predicted that the Chinese government will further expand fiscal spending in the second half of the year to alleviate deflationary pressures in certain sectors and boost market confidence. However, they assessed that while budget adjustments remain possible this year, they are not urgent given that economic growth in the first half is expected to exceed 5%.

Source: Central News Agency (Taiwan), June 24, 2025
https://www.cna.com.tw/news/acn/202506240177.aspx

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/