China has increased civil servant salaries in a move to boost its struggling economy, Bloomberg reports.
Newsweek contacted the Chinese Ministry of Human Resources and Social Security for comment via email outside normal business hours for comment.
Why It Matters
According to Oxford Economics, an economic advisory firm, the Chinese economy is facing the looming threat of a "deflationary spiral." Downward pressure on prices threatens to discourage spending and investment, requiring the government to adopt measures to begin a "consumption recovery."
Bloomberg described the new pay increases as an attempt to "boost morale and spur spending," linking the move to President Xi Jinping's professed desire to increase domestic consumption in 2025.
What To Know
On December 31, Bloomberg reported that China had increased the salaries of its government employees by at least 500 yuan ($68). This equates to a raise of about 5 percent across professions, including teachers, bureaucrats and police officers. Citing unnamed sources within the Chinese civil service, Bloomberg said some of the pay rises were carried out as lump sum payments and without notice.
The government has not confirmed the move, which Reuters estimates may inject between $12 billion and $20 billion into the Chinese economy as the country has 48 million public-sector workers.
China's last publicly announced wage increase for civil servants was in 2015, when some 40 million civil servants received a raise of about 300 yuan, which was worth $48 at the time, according to the state-run newspaper Global Times.
Increases were also reported in 2018 and 2021, though details of these raises were never announced by the government and remain unclear.
The latest increase comes as Chinese officials struggle to increase domestic consumption, which continues to lag significantly behind the world average as a percentage of gross domestic product, World Bank data shows.
China's overreliance on investment and its trade surplus prompted U.S. economist and Nobel laureate Paul Krugman to say in June that Beijing appeared "bizarrely unwilling" to boost domestic demand despite the threats this posed to the stability of the country's economy.
What People Are Saying
Journalist and economist Lizzi Lee wrote on X, formerly Twitter, on January 3: "It's difficult to say for certain, but my gut tells me that the recent salary raise for civil servants in China is less about stimulating consumption and more about addressing a morale crisis that has reached historic lows at the grassroots level … The majority of these civil servants (think transportation police, community service workers) are the backbone of local governance, responsible for delivering basic public services and implementing policies. So when morale collapses, cracks start to show at the grassroots level. There's no comprehensive data on this, but media reports and Chinese social media posts paint a grim picture: many civil servants are quitting their jobs, frustrated by months of unpaid wages, unexplained pay cuts, and canceled bonuses."
Economist Eric Zhu told Bloomberg in December: "If more households in the non-public sector—such as low-income groups or parents with children—can benefit from cash support, that would be a bigger boost to consumer confidence and spending."
What Happens Next
Bloomberg warned that pay rises solely for civil servants could anger those in the private sector who are already grappling with long-term wage declines.
China is also gearing up for the U.S.'s upcoming administration change. President-elect Donald Trump, who is set to return to the White House on January 20, has vowed to impose significant tariffs on Chinese goods entering the United States.
This impending salvo in the U.S.-China trade war could further threaten Beijing's already ailing economy and bring China's struggles with weak domestic demand into sharper relief.
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