Local Governments in China Slash Civil Service, Teacher Bonuses

The move reflects a yawning gap between revenue and expenditure in everywhere but Shanghai, analysts say.
By Qiao Long and Chingman
2021-07-12
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Local Governments in China Slash Civil Service, Teacher Bonuses Teachers mark exam papers for the National College Entrance Exam in Nanjing, eastern China's Jiangsu province, June 16, 2021.
AFP

Cash-strapped local governments across China are ordering teachers and officials to pay back bonuses as plummeting tax revenues start to bite in the wake of economic damage wreaked by the COVID-19 pandemic, RFA has learned.

Civil servants and teachers at public institutions in Henan, Jiangxi, and Guangdong provinces were recently charged 20,000 yuan each in repayments for the first quarter of 2021, while being informed that all bonuses had been suspended indefinitely.

The move comes amid growing calls from the ruling Chinese Communist Party (CCP) to tighten the public purse-strings.

On June 7, the Nanchang water resources bureau in the eastern province of Jiangxi ordered state employees to repay their bonuses within 10 days, while authorities in Dexing city have ordered teachers to repay bonuses to their schools.

Teachers' bonuses in Jiangxi's Dexing typically amount to 20,000 yuan per quarter, not including an annual bonus, bringing the overall amount to more than the basic salary of most teachers.

Li Qiao, a scholar based in Jiangxi's Jingdezhen city, said the repayment demands indicate that the government is undergoing something of a fiscal crisis.

"Regardless of the authorities' claims of 'bumper harvests' of economic growth, closed-down shops and businesses are everywhere, and there is unemployment, while the pandemic is still under way," Li told RFA.

"That is bound to take a toll on tax revenues, and financial difficulties are inevitable," he said. "Reductions in bonuses and other benefits are already happening."

Civil service bonuses have been suspended in Shanghai, Jiangxi, Henan, Shandong, Chongqing, Hubei and Guangdong, according to Weibo posts from people living in those places.

Government employers in Guangdong's Chaozhou city were ordered at the beginning of this month to stop paying out housing subsidies and performance-related bonuses, according to one post.

Three days later, the government in Shanwei city followed suit.

Salaries for low-ranking civil servants, primary and secondary school teachers on paper typically range from 2,000 to 4,000 yuan a month, with the government handing out a wide range of child support payments, mortgage rebates and other benefits to top them up.

The Jiujiang Bank, based in Jiangxi, recently starting offering refund loans to state employees who can't afford to pay back their benefits.

Chengdu-based writer and independent researcher Tan Zuoren said similar announcements are being made in many places across China.

Bonuses canceled or taken back

"Performance bonuses for civil servants are being canceled or, in some cases, they are being chased for repayment, and bonus payments already issued will have to be repaid," Tan told RFA.

"There are many reasons for this fiscal tightness," he said. "Tax revenues will definitely have fallen since the start of the pandemic ... while spending has increased, leaving a big gap between revenue and expenditure."

According to official figures, that deficit rose by 30 percent in the first half of 2020, with local government debt skyrocketing by 3.4 trillion yuan.

Only Shanghai reported a fiscal surplus during that period, while all of the other cities, regions and provinces returned a deficit.

Henan, Sichuan and Yunnan all reported fiscal deficits of more than 250 billion yuan apiece.

"The government would never take the decision to cut civil service bonuses lightly," Li said. "In the first half of last year, only Shanghai managed to break even, while everywhere else was in deficit."

"When the government says we all need to tighten our belts, there's a reason for that," he said.

Premier Li Keqiang first warned of such belt-tightening in his 2020 annual government work report to the National People's Congress (NPC).

Citing "unprecedented" economic challenges sparked by the pandemic, Li called on governments at all levels to tighten their belts and commit to negative growth in spending, while reducing "non-urgent and non-essential" expenditure by half.

Finance minister Liu Kun told the NPC that the central government in Beijing would boost funds transferred to local governments by 12.8 percent to counter the economic fallout.

Translated and edited by Luisetta Mudie.

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