In order to make up for a 24% pay cut, Zhang Jinming, who holds a job at a state-owned enterprise, has been delivering takeout on his electric bike for three hours every night after work and on weekends. He told Reuters that it’s not considered “very dignified” for someone working within the system to have a side job as a delivery driver, so he’s afraid of running into someone he knows. While China’s economy appears to be maintaining growth on the surface, the presence of deflation and a decline in real income are forcing more and more grassroots workers to seek additional jobs to supplement their household income, exposing the underlying struggles that official data tries to conceal.
Zhang said, “Working at a state-owned enterprise while also delivering takeout is actually a bit embarrassing.” He currently works at a real estate company where his monthly salary has been reduced from 5,500 yuan to 4,200 yuan (about $585). He has to deliver food every night until 11:30 p.m. to earn an extra sixty to seventy yuan. He mentioned, “The pay cut has put a tremendous amount of pressure on me, and many of my colleagues have already left, leaving me to take on their workload.”
Official figures from the Chinese Communist Party show that China’s GDP grew by 5.2% annually in the second quarter of this year, but most industries and workers have not benefited from this growth, instead facing even greater pressure. Several analysts have questioned the optimism behind this figure and have warned that risks will significantly increase in the second half of the year.
Amid escalating tensions in US-China trade relations and intensified export competition, key export industries in China such as automotive, electronics, and public utilities are experiencing delays in contracts and accounts receivable, with many enterprises owned by local governments facing financial constraints. Profit margins of companies are being squeezed, factories are caught in deflation, and employees are becoming the first victims of cost-cutting measures.
The decline in profits and wages is dragging down tax revenue, prompting state-owned enterprises to further tighten their budgets. Overall, China’s economic growth has long been skewed towards export industries, overlooking domestic demand and household consumption. Max Zenglein, a senior economist at the Conference Board of Asia, pointed out that China is in a “dual-speed economy” where industries continue to output while consumption remains weak. He believes that the root cause of low profits and deflationary pressures lies in the unlimited expansion of manufacturing and technological capacity.
“This trade war with the United States is transforming into an internal economic issue for China,” he stated.
28-year-old teacher Huang, who teaches in Chongzuo, Guangxi, has not received his salary for the past two to three months. He mentioned, “I can only endure it and dare not resign.” With no income, he has to rely on his parents for financial support, saying, “If I had a mortgage, a car loan, and children, the pressure would be unimaginable.”
Another rural teacher, Ms. Yun from Linquan County, Anhui, stated that she only receives a basic salary of 3,000 yuan per month, with the performance bonus that used to account for about 16% of her salary being continuously delayed. She expressed, “After deducting fuel costs, parking fees, and property management fees, I don’t even have enough to buy groceries. If it wasn’t for my parents, I would have starved long ago.”
Official data shows that as of May, accounts payable growth rates for computer communication equipment and automobile manufacturing industries reached 16.6% and 11.2% respectively, significantly higher than the industry average of 9%; the water and gas industries also increased to 17.1% and 11.1% respectively. Liao Minxiong, a senior economist for the Asia-Pacific region at GlobalData.TS Lombard, noted that these figures reflect increased financial pressure on enterprises, a consequence of the Chinese Communist Party’s “capacity first” policy.
The decline in income has caused a bottleneck for the CCP’s “boost consumption” policy. There are concerns that if deflation persists, people will further delay their spending, exacerbating the economic downturn.
20-year-old service worker Huang Tingting from Jiangsu resigned last month as her restaurant business suffered a sharp decline during the escalation of tensions in US-China trade, with the boss demanding four days of unpaid leave each month. She said, “I still have to pay rent and make a living.” Although Jiangsu is a major exporting province with growth rates higher than the national average, she has been unemployed since June and has not yet found a new job.
“The job market this year is worse than last year,” she mentioned.