In the recent years, the economic policies implemented by the Chinese Communist Party are brewing a crisis that shatters the dreams of high-income individuals and subsequently dampens their motivation in the workforce. Experts believe that this phenomenon could lead to a more widespread social crisis.
Thomas Wu, a 43-year-old insurance industry executive, expressed his disillusionment stating, “Salary increases are no longer correlated with the level of effort put into work. My job feels meaningless.”
According to a report by Bloomberg, in the wee hours at 1 a.m., Mr. Wu found himself cycling through the deserted streets of Shanghai, once again succumbing to despair. As part of a nationwide initiative by state-owned financial companies to reduce salaries, Wu’s income was slashed by 20%. Facing the prospect of potential layoffs, he worries about how to gather 600,000 RMB (approximately 84,500 USD) to continue sending his two children to an international school, a symbol of the lifestyle of China’s upper-middle class. His six-year-old child is struggling with mathematics.
“What’s the point of pushing our children so hard?” Wu lamented. “Top graduates can’t find jobs, and even returning overseas graduates are struggling to secure employment.”
Under the economic policies of Chinese leader Xi Jinping in recent years, the lives of millions of high-earning professionals in China have been drastically disrupted. Wu is just one among them.
For most of this century, industries like finance, consumer technology, and real estate have been the primary drivers of economic growth in China. By 2022, the finance industry alone employed nearly 8 million people and offered high salaries. However, these industries are no longer favored. Chinese leaders are now channeling resources into sectors like electric vehicles and chip production, emphasizing “high-quality” development over “high-speed” growth.
This shift has left many Chinese strivers adrift. Instead of being rewarded for long hours of work and risk-taking, they now face salary cuts, layoffs, and government criticism for what is perceived as a “hedonistic” lifestyle.
Bloomberg interviewed over a dozen individuals working in the financial services and other industries that have fallen out of favor with the Chinese regime. These individuals are grappling with their predicament, highlighting the pressures brought on by salary cuts, upgraded expense reviews, and social media shaming for their affluent lifestyles.
“We feel like rats on the street, getting beaten by everyone,” said Tracy, an employee at a Beijing securities company. “This country doesn’t seem to value its financial talent.”
Executives like Sharon Cao from a mutual fund company voiced growing pessimism within the industry. Cao mentioned that the sleeping pill, Stilnox, has become her “best friend.”
“No hope,” Cao remarked, revealing that she recently sold her Porsche and avoids dining out as she anticipates further salary reductions this year. “Your fate has no relation to your abilities,” she added.
In April this year, Reuters reported that China International Capital Corporation (CICC), a prominent firm in the securities industry, was significantly reducing base salaries to cut costs. The basic wages of many traders were slashed by 25%, affecting over 2,000 employees. This move comes on the heels of the company cutting bonuses by up to 40% last April.
The despondent mood prevalent among well-educated Chinese workers has the potential to worsen the economic gloom hovering over China. Stock market performance lags behind global peers, and consumer spending hovers around levels close to the weakest since the pandemic lockdowns. Inflation has been a persistent issue in the Chinese economy since last year, and signs of spiraling deflation now pose a heightened risk to the future of the Chinese economy.
According to Bloomberg, within the massive bureaucratic apparatus of the Chinese government and state-owned enterprises, employees feel a sense of stagnation. They believe that taking proactive measures yields limited benefits, while any misstep could lead to endless negative repercussions. According to Xinhua News Agency, at least three top investment bankers from different securities firms have been detained by Chinese authorities since August, as part of the latest phase of anti-corruption efforts affecting approximately 4.7 million people. In the long run, this chaos raises a pressing question: What will happen to the economy when some of the most talented and intelligent workers lose their drive and morale?
Christopher Marquis, a professor of Chinese management at the University of Cambridge, stated, “There is a dangerous undercurrent within the Chinese workforce. These individuals have been pivotal in driving the Chinese economy, but their disillusionment may lead to a more widespread social crisis.”
Some individuals, disheartened by the extent of the decline in company performance and arbitrary salary reductions, are considering opportunities outside of China. Nathan, a 35-year-old employee at a mutual fund company in Shanghai, expressed contemplating a possible move abroad. “Staying here would mean wasting at least three to five years of my time.”
The financial sector is not the only one feeling pressure. The consumer technology industry is also in dire straits. Since the crackdown, Baidu, Alibaba, and Tencent collectively have laid off over 63,000 employees.
Ivy Zhang, formerly a high earner who used to work until 11 p.m. selling real estate worth over 100 million USD for Country Garden, shared how her annual income once reached 83,000 USD. Now, she sells health products on social media.
“If you still aspire to the life you had before, you’re basically dreaming,” Zhang told Bloomberg in an earlier interview this year. She decided to postpone having children, cook at home to avoid dining out expenses, and minimize social activities to cut costs.
According to the “2023 Workplace Insight Report,” the average monthly salary for recruits in the digital technology industry fell by 7% in 2023, with technical positions seeing a 12% drop and design positions experiencing an 18% decrease.
In a report by Economic Observer in January, employees from various state-owned enterprises across different industries and hierarchies stated that the salaries and year-end bonuses for the fourth quarter of 2023 were reduced, especially for management and administrative positions. Some respondents claimed that the overall salary reduction for 2023 approached nearly 30%.
On April 11, state media First Financial reported citing Wind data that the average salary reduction for managerial positions in Chinese banking in 2023 was 13%, with some top-level reductions reaching up to 40%.
On May 11, Economic Observer reported that several investment banks, including Citic Securities, CICC, and Citic Securities International, recently adjusted the salaries and positions of their staff: Citic Securities decreased salaries by about 20%; CICC saw reductions of up to 25%; while Citic Securities International had already decreased by approximately 20% earlier this year and planned for further cuts.