China raises salaries of civil servants to boost consumer spending

By Bloomberg News 

China has awarded a range of civil servants across the nation their first significant pay rise in years, according to people familiar with the matter, as policymakers try to boost morale and spur spending. 

The basic salaries of many government employees have been bolstered by at least 500 yuan ($68.51) per month, according to people who asked not to be identified discussing sensitive matters. That wage hike has been backdated to July, they said. 

The percentage increases varied depending on the base salary, with one of the people saying it amounted to a raise of roughly 5 per cent. China last publicly hiked civil servants’ wages in 2015, when some 40 million staffers got an average lift of 300 yuan per month. Social media users suggested salaries were also boosted in 2018 and 2021, but the government never confirmed the hikes and the percentage increases are unclear.   

 

The Communist Party hasn’t published a public announcement on this month’s wage hikes, making it hard to determine the scope of the program or who will foot the bill. But the unexpected increase extends to teachers, policemen and bureaucrats from around the nation of 1.4 billion people, the people said.  

For some, the pay rises appeared without explanation. A police officer in southwestern China said he saw a 3,500 yuan lump sum in his December payslip labeled “back payment,” though he wasn’t owed any money. His colleague said it was a raise going back to July, according to the officer, who asked not to be named discussing a private matter. 

China’s State Council Information Office and Ministry of Human Resources and Social Security didn’t reply to faxed requests for comment. 

President Xi Jinping has declared boosting domestic consumption the top priority for 2025, as his government ramps up efforts to bolster a slowing economy battling its longest deflationary streak since 1999. Officials so far have relied on rate cuts and housing sector support to encourage spending, refraining from nationwide cash handouts for consumers. 

Lump sum payments to government workers will put money in their pockets right before the New Year and Spring Festival holidays. Pay rises for civil servants alone, however, risk sparking a backlash from private sector workers struggling with wage declines.   

While the initial impact likely won’t be huge given the limited number of civil servants, it could raise hopes of authorities extending support to a broader population, said Eric Zhu of Bloomberg Economics.  

“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,” he added. 

Officials are ramping up support for lower income groups to ensure social stability, after economic pressures coincided with a spate of fatal attacks this year. Shanghai announced Tuesday it will boost subsidies and housing support for families with multiple children, while the government recently urged local authorities to issue more handouts to those struggling with the cost of living. 

It’s unclear if regional authorities can afford to do so. Civil servants have been complaining over the past year of slashed bonuses, falling wages and delayed salary payments, after the property crash created a debt crisis for local governments.  That’s left the foot soldiers Xi relies on to boost growth “lying flat,” with even the nation’s richest provinces seeing a slowdown. 

One teacher in eastern China said that while her pay had increased in December, with a lump sum going back to the summer, when taking into account the deep bonus cuts of recent years her wages hadn’t actually risen. Another civil servant said the bump amounted to far less than several rounds of pay cuts he’d endured. 

Recognizing the problem, China’s 24-man Politburo earlier this month vowed action to get cadres “motivated” to engineer the nation’s economic recovery. That marked a change in tune from Xi’s warning just a year ago that cadres should “get used to belt-tightening.”  

The pay rises also come as Beijing braces for the return of US President-elect Donald Trump, who is vowing to choke Chinese exports that have been a bright spot for the economy. A tariff war would put more urgency on Beijing to get domestic consumers spending.