China’s debt problem just keeps getting bigger, and now, the Communist economy faces a major conundrum as it stands between a mountain of debt and an acute shortage of money. The Chinese Communist Party has been evading problems created by itself for too long now. Under Xi Jinping’s “common prosperity” goal, wealth was supposed to be distributed from the rich to the poor and bring everyone on the same plane in terms of affluence. However, his strategy seems to have failed big time, as the fiscal health of China has been exposed to be slipping down the drain. The Chinese government is running out of money, and now, it is unable to pay its workers.
China Orders Govt Employees to Pay Back Bonuses; Cuts Salaries
According to Radio Free Asia, local governments across China are ordering teachers and officials to pay back bonuses. Civil servants and teachers at public institutions in Henan, Jiangxi, and Guangdong provinces were recently charged 20,000 yuan each in repayments for the first quarter of 2021 while being informed that all bonuses had been suspended indefinitely. Civil service bonuses have been suspended in Shanghai, Jiangxi, Henan, Shandong, Chongqing, Hubei and Guangdong.
In the eastern province of Jiangxi, the Nanchang water resources bureau ordered its employees in June this year to repay their bonuses within 10 days. Authorities in Dexing city have ordered teachers to repay bonuses to their schools. Many government workers in China are seeing their salaries getting cut by around one-fifth recently.
Weibo has been replete with Chinese citizens complaining against the recent diktats. One post on the Chinese social media platform highlighted how government employees in Guangdong’s Chaozhou city were ordered at the beginning of this month to stop paying out housing subsidies and performance-related bonuses. Across China, bonuses of government employees are being cancelled, if not being taken back in case they have been handed out already.
According to Li Qiao, a scholar based in Jiangxi’s Jingdezhen city who was quoted by RFA, the demand for bonus reversals indicate that the Chinese government is undergoing something of a fiscal crisis. Qiao added, “Regardless of the authorities’ claims of ‘bumper harvests’ of economic growth, closed-down shops and businesses are everywhere, and there is unemployment, while the pandemic is still under way.”
Xi Jinping Playing with Fire
Xi Jinping is playing a dangerous game by depriving Chinese government employees, CCP loyalists and ordinary workers of their hard-earned salaries and bonuses. But then, how can the CCP doll out money, salaries and bonuses when its coffers are drying up? The fiscal health of China is not pleasant. In the first half of 2020, all provinces except Shanghai reported fiscal deficits, meaning they expended more than they earned.
According to official figures, that deficit rose by 30 per cent in the first half of 2020, with local government debt skyrocketing by 3.4 trillion yuan. Henan, Sichuan and Yunnan all reported fiscal deficits of more than 250 billion yuan each.
Chinese regulators are concerned about the increasing debt-to-GDP ratio which is going out of their control. China’s non-financial-sector debt—incurred by the government, corporate, and household sectors—reached a record level of 272 per cent of China’s gross domestic product (GDP) in 2020. In the third quarter of 2021, that number stood at 265 per cent of GDP. But the marginal drop in the debt to GDP ratio has come at the cost of China’s economic growth. And then, the fiscal status of the country continues to remain critical, which is why China is finding it excruciating to pay salaries and bonuses to government employees.
The CCP is Angering its Foot Soldiers
Who are government employees in China? They are all members of the Chinese Communist Party. And for them to be deprived of their salaries and bonuses will set in motion a chain of events that might just end up with Xi Jinping being thrown out of power next year, as he seeks re-election as China’s president and the CCP’s general secretary.
These government employees, which the Chinese regime is depriving of salaries and bonuses, form the backbone of China’s administrative setup. Teachers are meant to teach students the ideals of the CCP, while other government workers are meant to carry out the orders they receive from the party’s top brass. What do you think would happen if they are not paid their dues, are ill-treated and finally decide to turn against the Chinese regime? That’s right. Xi Jinping will face a rebellion that might just topple his government.