China officials cut costs as Xi says 'belt-tightening rules here to stay'

By Bloomberg News

No stationery at government meetings, a ban on flashy buildings and inspectors to watch for wasted food at official functions. 
 

These are some of the measures that local governments across China are taking in accordance with an order from Beijing that they “get used to belt-tightening,” an edict laid down last month by top leaders at the Central Economic Work Conference. 

While President Xi Jinping has long discouraged excess, the renewed calls for austerity come as the world’s second-largest economy faces severe headwinds, from a massive debt burden at the local level to a collapsing property market. 

 

“It is hard to square lavish spending on official ceremonies and events with an increasingly pessimistic economic outlook,” said Dominic Chiu, senior analyst at Eurasia Group. “The scaling down of expenditure is also important for upholding the party and government’s reputation in the eyes of the public.”

The order’s use of the term xiguan, meaning “get used to,” is particularly significant. It’s the first time top officials have used the word in such a context, suggesting that despite Xi’s yearslong campaign to crack down on ostensible displays of wealth and corruption, many parts of the bureaucracy are still lagging behind. 

It also signals that thriftiness is here to stay.

The term xiguan is “foreseeing that the financial situation is unlikely to fundamentally improve for a considerable period in the future,” said Lu Xi, an assistant professor at the Lee Kuan Yew School of Public Policy in Singapore who specializes in China’s economy. “The central government is unlikely to provide financial assistance to local governments.”

China’s economy is battling a barrage of challenges, including a deepening housing slump, fears of a deflationary spiral and high levels of youth unemployment. Meanwhile, the government is considering measures such as a large rescue package to curtail a stock market rout that reflects a growing lack of faith in the country’s outlook.

The corruption watchdog said in an editorial last week that xiguan “emphasizes that living on a tight budget is not a requirement or a solution just for the time being.” It also warned that some local governments are asking for more money than they deserve from the Beijing.

Excessive bureaucracy is an obvious place for local governments to start trimming costs. Guangzhou, a metropolis in southern China, issued a notice at the start of the year exhorting officials to reduce the duration and size of meetings, prioritize online conferences and control the number of paper documents printed. Nearby Guangxi province also said it plans to do teleconferences as much as possible.

Food Monitors
 

In Zhejiang, a wealthy province on the east coast, a new law that went into effect this month asks authorities to “run all affairs in strict adherence to thriftiness,” including a ban on expanding government offices, encouraging officials to carpool and taking into account food waste in the performance evaluations of work units. 

Southwestern megacity Chongqing is also taking aim at food waste, with the municipal government announcing last week that it will deploy supervisors to monitor wastage during its local parliament session starting Sunday. It will also scrap floral decorations and fruits in participants’ rooms. Officials estimate the measures will result in a budget reduction of 7.2%. 

In poorer parts of China, building impressive, some might say weird, architecture, has long been a way for such places to attract tourists and businesses. With the graft watchdog’s editorial also calling out cities for continuing to spend on such buildings, the government of Tongling, a city in Anhui province, vowed this month to refrain from blindly embarking on vanity projects. It also said it would take other measures, like cutting back on office supplies at meetings. 

In a WeChat post on Wednesday, Xianning, a city in Hubei, called on party members to “reasonably” use official telephones and avoid chitchatting or handling non-work matters on the phone. 

Beyond the local government level, other state-linked institutions are joining in the austerity drive. Sichuan Engineering Technical College will cap the use of air-conditioning in the summer at no lower than 26C (79F), and heating at no more than 20C in winter. And at least one state-owned enterprise has told its employees to limit the duration of and number of people going on business trips overseas this year, according to a notice seen by Bloomberg News. 

Many local governments are already under serious fiscal strain due to the double blow of the pandemic and the property downturn and will find it hard to further tighten belts. Many are struggling just to pay civil servants or vendors and provide social benefits. 

Overall, scaling back on spending is hard to implement in China’s public sector because of structural issues like low wages for civil servants and a reliance on lavish gift-giving for building personal relationships that are key to promotions, said the Eurasia Group’s Chiu. 

“It is also hard to imagine that these statements and disciplinary measures do not have an adverse impact on cadre morale,” he added.