In mainland China, the concept of a “iron rice bowl” in the eyes of the people is no longer as secure as it used to be. Last year, Henan province, with a budget deficit soaring to 655 billion yuan, initiated staff reductions in public institutions. Except for schools and hospitals, these institutions must streamline by at least 50%, with a reduction of at least 30% in staffing, and not less than 10% for institutions with fiscal appropriation. Units with less than 16 staff members and positions below department level will no longer be retained. Financial experts analyze that this indicates the Chinese government is truly running out of money.
According to a report by the South China Morning Post on May 5, local Chinese Communist Party governments are painstakingly cutting thousands of jobs from their massive public institutions to allocate more funds to new policy priorities, such as scientific research to maintain social stability and grassroots positions.
In 2024, China faces ongoing fiscal pressures. Local CCP governments are grappling with challenges such as budget surges and are finding ways to reduce the number of secure job positions, the so-called “iron rice bowls.”
After repeatedly emphasizing “tightening belts,” the CCP’s Ministry of Finance issued a notice in March this year to strengthen budget constraints, requiring central and local government agencies to “get used to tightening belts.” A finance ministry official stated that making tight budgets a conscious principle in budget arrangements and implementations is essential.
Since mid-April, Henan province has released detailed information on the downsizing of provincial-level public institutions, attracting the attention of millions of Chinese civil servants. Over the past few years, the workforce of public institutions in the province has been reduced by over 56,000 people. An official involved in the layoffs in Henan said, “We are tightening personnel quotas in each unit. Depending on the severity of excess staff, we inform them that for every two to three retirements or resignations, they can only hire one new person. Therefore, they will reach the target numbers in a few years.”
The official also mentioned that the workload for each department will increase, leading to complaints from some, but this is perceived as a better alternative to layoffs.
According to data from the National Bureau of Statistics of China, the number of employees in urban public administration, social security, and other organizations increased from 15.4 million in 2012 to nearly 20 million in 2022. During the same period, the proportion of public sector employees in urban total employment rose from 10% to 12%.
In 2023, except for Fujian, all provinces and cities in China recorded budget deficits. According to the Henan provincial government work report, the province had revenues of 451 billion yuan, but expenditures reached 1.106 trillion yuan, resulting in a deficit of 655 billion yuan.
Henan is the largest province in terms of registered population in China, consisting of 17 prefecture-level cities, 153 counties/districts, and 2458 townships and streets, ranking among the top provinces nationally.
An article on the WeChat public account “National Strategy” states that administrative positions, institutional positions, and state-owned enterprise positions, all considered as “iron rice bowls” supported by the government financially, have become an establishment within the system. These secure job positions, once entered, are not easily terminated. Therefore, in recent years, many have been eager to take civil service exams.
Last year, the number of applicants for the national civil service exam exceeded 3 million, with over 5 million applicants for provincial exams, and countless more for departmental exams. Eventually, all of them rely on government funding, making them part of the broad category of government-supported personnel.
Now, against the backdrop of the government repeatedly emphasizing “tightening financial belts,” various regions have finally started to take action against the “iron rice bowls.”
On April 9, the Henan Provincial Development and Reform Commission website released the “Top Ten Cases of Economic System Reform in Henan Province in 2023.” Among them, the case handled by the Henan Provincial Party Committee Office was listed.
Regarding the scaling down of organizational positions, the Henan Provincial Party Committee Office wrote in the article, “We will decisively reduce what needs to be reduced.”
At the provincial level, in addition to schools and hospitals, a “5-3-1” proportionate reduction is implemented, meaning a reduction of at least 50% for public institutions and 30% for staffing positions. Institutions with fiscal appropriation must reduce by no less than 10%. In principle, units below departmental level and with fewer than 16 staff members will no longer be retained. “Hollow units” and units that have completed specific historical tasks will be abolished.
At the city and county levels, following the provincial approach, a “4-2-1” reduction will be applied. Additionally, a “double control” mechanism for reducing quotas and limits will be established for prefectural-level public institutions, ensuring a reduction proportion of no less than 25% and limiting the number of retained institutions to the designated quota. For county-level institutions, quotas and numbers will be determined based on the idea of “overall reduction, city-level reduction, and narrowing the gap.” The retracted institutional positions and quota limits post-reform will be managed at the city and county levels, promoting a “reduction at higher tiers, supplementation at lower tiers” approach.
However, the positions that have been streamlined will not completely disappear; instead, some will be decentralized to grassroots departments, while others will be allocated to key areas such as technology, education, and livelihood.
The news of the downsizing of public institutions in Henan has continued to spark discussions.
On May 5, financial influencer “Ji Qingkemo” remarked that Henan’s downsizing of public institutions aims to improve efficiency because the government is truly running out of money and has to drastically cut institutional positions and establishments.
He noted that the downsizing at the provincial level in Henan could be interpreted as the province, in principle, no longer retaining department-level public units. At the city and county levels, the aim is to reduce at the county level while supplementing at the town level, by having those cut from the county positions move to township-level roles. Individuals who are redundant in their office roles will have to move downward. The so-called “iron rice bowl” is no longer as secure. For instance, those “reassigned” to counties who are unwilling to go would be laid off without replacements.
“Ji Qingkemo” stated, “Within the system, nobody is happy about cutting into their own ‘cake.’ Who would willingly wield the knife to their own neck? But under the pressure of financial constraints, such actions will inevitably become more common. For instance, local party history bureaus, local historical and cultural offices, and various other bureaucratic offices, when the government faces budget constraints, will use the guise of reform to ‘reinforce’ downward. The further down this goes, the more passive those at the lower levels become.”
Data shows that Henan’s provincial reform has relocated 5,638 institutional positions to counties (cities, districts) and allocated over 3,300 positions to scientific innovation platforms such as the Provincial Academy of Sciences, Songshan Laboratory, and Shennong Agricultural Laboratory.
Why start “smashing” the iron rice bowl? An article on “National Strategy” points out that it all comes down to finances. The real estate sector is navigating its most significant turning point in over 20 years, coupled with local debt issues, necessitating strict fiscal expenditures.
Simultaneously, the population growth has plateaued, with around two-thirds of provinces experiencing negative population growth. In some areas, all cities outside the provincial capital are witnessing population declines, with even more significant drops in county-level populations. Even though finances have been growing at a high rate, faced with shrinking populations, maintaining such a large framework of government-supported employees is no longer necessary. Therefore, streamlining governance becomes an inevitable choice when populations decline, and fiscal growth is limited.
On social media, discussions about Henan’s “smashing” of the iron rice bowl attract overwhelmingly supportive comments from netizens, arguing that it is urgent to break the iron rice bowl as ordinary people are already suffering from unemployment. Some suggest consolidating various bureaucratic offices such as veteran affairs bureaus, trade unions, CPPCC, literary federation, holiday offices, science association, county libraries, party history bureaus, archives, and youth league committees.
Some netizens recalled the mass layoffs of state-owned enterprise workers in the past and questioned why institutional positions cannot be subjected to layoffs.
“Ji Qingkemo” remarked, “How many people in China rely on the iron rice bowl (government-funded positions)? Roughly estimating, there are 8 million civil servants and 30 million institutional positions. Among them, around 20 million work in places like schools and hospitals, and the remaining 10 million are scattered throughout various institutions. Therefore, this round of downsizing is targeting these 10 million individuals.”
He believes, “Not only Henan but other provinces will follow suit in downsizing institutional positions, which will become increasingly common; what seems like news today will become the norm in the future.”
In Zhengzhou, some civil servants have been owed salaries for a long time.
“Ji Qingkemo” commented, “Though civil servant layoffs have not occurred yet, it’s just a matter of time. People are already aware of civil servant salary cuts, all due to the government’s financial constraints. As soon as the money runs out, there will be no escape from the inevitable for civil servants.”
He also cautioned that various fees will likely increase in the future because the government needs money.