Jan 3 2025: Millions of government workers across China received unexpected wage increases this week, as Beijing seeks to boost consumer spending to counter the nation’s slowing economy.
The cumulative payout, if extended to all 48 million public-sector workers, could inject between $12 billion and $20 billion into the economy, according to terms shared with Reuters. This marks the first nationwide salary hike for civil servants since 2015, when pay was raised by over 30% to combat corruption and enhance spending power.
Although no official announcement was made, reports suggest an average monthly pay increase of 500 yuan ($68.50), with junior government workers seeing raises of about 300 yuan ($41). In many cases, the increase was backdated to July and issued as a lump sum, akin to a bonus.
“Beijing’s strategy seems to focus on encouraging consumption among groups more inclined to spend,” said Xu Tianchen, senior economist at the Economist Intelligence Unit. He noted that public-sector employees, benefiting from robust social security, are more likely to spend compared to private-sector workers.
The pay hikes cover a broad range of public-sector roles, including teachers, police, and civil servants. Salary adjustments reportedly vary based on provincial economic and fiscal conditions, with some government employees in southern China reporting increases of around 10%.
This initiative aligns with China’s decision to raise its budget deficit to 4% of GDP in 2025 to support an economic growth target of 5%. The move aims to counteract challenges such as a prolonged property crisis, deflationary pressures, and potential higher U.S. tariffs.
The reaction to the wage increase has been mixed. Some recipients celebrated the pay rise, calling it a step toward reversing deflation. Others criticized the narrow focus, questioning the strategy of stimulating consumption by targeting civil servants.
Interest in civil service jobs remains high, with a record 3.4 million young Chinese taking the civil service exam last year, drawn by job security amidst private-sector instability. Despite this demand, some local governments have faced challenges in funding salaries, leading to wage cuts and job reductions in certain regions.
The surprise pay hikes have prompted optimism among many government workers, with one Beijing employee noting that the news spurred her team to celebrate at a restaurant. “This should be helpful to boost consumption,” she remarked.
