The Chinese government is out of money! Even the military and civil service start getting pay cuts.

Summary

The Chinese military commission issued measures to improve army construction efficiency, emphasizing a frugal budget mindset. The document indicates China's financial constraints post-zero COVID policy, with widespread pay cuts and delays for civil servants and military personnel. Corruption remains rampant despite anti-corruption efforts, affecting military expenditures. Local governments are also tightening budgets, reflecting severe financial strain. Economic challenges, reduced revenues from real estate, and the impact of global trade dynamics have exacerbated financial difficulties, leading to significant fiscal reforms and austerity measures across various sectors in China.

Takeaways

• 📉 China's military commission issued a document emphasizing frugality and efficiency in military spending to improve the quality and efficiency of army construction.
• 💰 The document suggests that the government may be experiencing financial constraints affecting military funding.
• 🏦 Since the second half of 2021, a wave of pay cuts has affected civil servants and military personnel across almost all of China's provinces.
• 💸 Delays in salary and pension payments have been reported for civil servants, military personnel, and retirees.
• 🔍 Reports indicate widespread salary reductions in military research institutes and other state sectors.
• 📊 Financial difficulties have led to a reduction in public expenditures and downsizing of government staff at various levels.
• 💼 Corruption within the Chinese military remains a significant issue, despite anti-corruption efforts by Xi Jinping.
• 🚫 Local governments face financial constraints, affecting their ability to provide subsidies and maintain infrastructure projects.
• 🏠 The real estate crisis has significantly reduced local government revenues from land sales, exacerbating financial difficulties.
• 🌏 External factors, such as the trade war and the Russia-Ukraine conflict, have negatively impacted China's manufacturing sector and local revenues.

Q & A

What is the title of the document issued by China's military commission on June 20th?

The title of the document is 'Measures on Insisting on Struggling Hardly and Building the Army Diligently and Thriftily'.

What is the main focus of the document issued by China's military commission?

The main focus is to improve the quality and efficiency of army construction by maintaining a mindset of living on a tight budget and careful budgeting.

Why is the slogan of building a frugal military significant at this time?

The slogan is significant because it is seen as a sign that the government is running out of money for the military.

What impact did the zero COVID policy from 2020 to 2022 have on local finances in China?

The zero COVID policy emptied local finances, leading to a wave of pay cuts for civil servants across almost all of China's provinces.

What difficulties are being faced by civil servants and retirees in China regarding their salaries and pensions?

Many civil servants and retirees are experiencing delays in their salaries and pensions, with payments being made half a month or a month later than expected.

How has corruption historically affected the Chinese military's expenditures?

Corruption has led to significant portions of the military budget being misappropriated by officials, with estimates suggesting that 20% of military spending is taken by corrupt officials.

What measures has Xi Jinping taken to combat corruption in the military?

Xi Jinping has carried out a major purge of the military, knocking out at least 160 generals in the name of anti-corruption, and has raised military salaries three times to reduce reliance on 'gray incomes'.

What financial constraints are local governments in China facing, and how are they addressing these issues?

Local governments are facing financial constraints due to reduced revenues from land sales and are cutting civil servants' salaries and bonuses, as well as reducing staff and tightening control over public expenditures.

What impact has the trade war and the Russia-Ukraine war had on China's manufacturing sector?

These events have resulted in fewer orders for China's manufacturing sector, negatively affecting local revenues and exacerbating financial constraints.

Why are local governments in China struggling financially despite previous infrastructure investments?

Many infrastructure projects lack fiscal returns and have become liabilities that require extra money for maintenance, compounded by the real estate crisis which reduced revenue from land sales.