Zhang Jinming, 30, supplements his shrinking salary at a Chinese state-owned enterprise by delivering food for three hours each evening. "It's not really considered proper to have a side hustle while working for a state-owned company," Zhang said, hoping to avoid his colleagues during his extra shifts, which also include weekends. His real estate company now pays him only 4,200 CNY (585 USD) monthly, down from 5,500 CNY.
China has maintained economic growth by supporting continuous port and factory operations. However, weak demand has impacted corporate profits, leading to wage cuts and forcing workers like Zhang to find additional income streams.
"I have no other choice. The pay cut has put immense pressure on me. Many colleagues have quit, and I'm now shouldering their workload as well," Zhang said. He works until 11:30 p.m. each day, earning 60-70 CNY nightly.
On 15/7, China announced its Q2 GDP grew by 6.3% year-on-year, exceeding economists' forecasts. This suggests the export-driven growth model has withstood US tariffs. However, this positive figure masks growing cracks in the economy.
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People walk past restaurants in Sichuan, China. Photo: Reuters |
People walk past restaurants in Sichuan, China. Photo: Reuters
Late payments on contracts and invoices are increasing, even in key export sectors like automobiles and electronics. Local government-owned utilities are also experiencing similar delays as local authorities tighten spending to support factories affected by tariffs.
Fierce competition for international orders, already reduced by trade tensions, further squeezes industrial profits, pushing down producer prices despite increased export volumes. This pressure translates to cost-cutting measures, impacting workers.
Declining corporate profits and wages lead to lower tax revenues, pressuring state-owned companies like Zhang's to cut spending. Rising bad debts in the financial system are also a concern as the government encourages lending.
Analysts attribute much of this imbalance to policies prioritizing exports over domestic consumption. Economists have long urged Beijing to shift support towards domestic services like education and healthcare, or policies boosting household spending. Without this shift, China could face slower growth in the latter half of the year.
This year, Chinese officials aim for GDP growth around 5%, similar to last year. In May, Beijing announced monetary easing policies, including lower lending rates and low-interest loans for consumption and elderly care. These measures aim to support the export-reliant economy.
Some sectors have shown improvement. The Purchasing Managers' Index (PMI) reached 49.7 in June, up from the previous two months, though still below 50. Exports also rose 5.8% year-on-year in June, with exports to Southeast Asia up 16.8% and to the EU up 7.6%.
Max Zenglein, an Asia-Pacific economist at the Conference Board, describes China as a "two-speed economy" – strong in industry but weak in consumption. These two factors are closely linked.
"Challenges such as low profit margins and deflation stem primarily from the continuous expansion of capacity in the manufacturing and technology sectors," he explained.
Frank Huang, 28, a teacher in Chongzuo City (Guangxi Province), said his school hasn't paid salaries for the past two to three months, awaiting funding from authorities. "I'm trying to endure; I don't dare quit," Huang said.
He has relied on his parents for support without his 5,000 CNY salary. "If I had a family, a mortgage, car payments, and children, the pressure would be unimaginable," he said.
Ms. Yun, another teacher in Anhui, receives only a base salary of 3,000 CNY monthly. Performance bonuses, about 16% of her salary, are "constantly delayed." "After paying for gas, parking, and service fees, there's not enough left for food," she said.
No official data on public sector salary delays has been released. However, late payments are becoming more common among industrial companies, particularly in computer, media, electronics, and automobile manufacturing – key sectors in China's economic plan.
Minxiong Liao, an economist at GlobalData TS Lombard APAC, believes liquidity is tight, a consequence of prioritizing output over demand. "These key sectors may experience slower growth in the future," he predicted.
With incomes squeezed, China faces greater difficulty boosting household consumption. Fears of prolonged deflation may further discourage consumer spending. After four consecutive months of decline, China's Consumer Price Index (CPI) only slightly increased by 0.1% year-on-year in June.
Huang Tingting, 20, quit her restaurant job in June after customer traffic plummeted in April amid escalating US-China trade tensions. Her employer had implemented four unpaid days per month to cut costs.
"I still have to pay rent and living expenses," she explained. Previously, finding new employment took only one or two days. However, Huang has been unemployed since June. One potential employer mentioned over 10 applicants for the position.
"The job market this year is even worse than last year," Huang concluded.
Ha Thu (Reuters)
