China’s local governments, desperate for cash, hold back wages

A new report from the Wall Street Journal has detailed how local governments in China are withholding wages from government-paid employees and pensioners in a desperate bid to save cash.

According to the report, dozens of medical staff in the city of Shanwei, located in southeast China, protested by occupying a hall within a public hospital in October over unpaid wages and bonuses. Retired city employees of Yichun, in the northeast of China, also gathered to protest pensions that had not been paid out for months.

The growing debt of local governments is stretching into the trillions, which the WSJ notes is largely “borrowed off the books,” as China’s shadow banking, which are loans outside of traditional banking, continues to swell.

Currently, China’s debt officially sits at just under $10 trillion. When factoring in shadow banking, the true debt reaches over $30 trillion.

The report further notes social media has been putting on a spotlight on months-long wage arrears, and it suggests cities are “strapped for cash” and drowning in debt, while recent cash injections via stimulus to local governments by the Chinese Communist Party, have only just “scratched the surface.”

Authorities are now cutting medical benefits and attempting to find unpaid taxes to bolster their budgets, but the ongoing impact will eventually affect China’s private business sector, employers of civil servants, contractors, and could lead to China’s economic growth grinding to a halt.

China’s Local Governments Hold Back Wages in Desperate Scrape for Cash—Beijing’s recent attempt to address the trillions in hidden debt held by local governments only scratches the surface@hannahmiao_ @RebeccaYFeng @TByGraceZhu https://t.co/mW4QWzCPythttps://t.co/mW4QWzCPyt

— Jonathan Cheng (@JChengWSJ) November 29, 2024

Employees of Shanghai-based Guoli True Leather Company protested this week after not receiving wages for months.
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China’s economic slowdown is worsening the situation on ground. Employees of Shanghai Guoli True Leather Company protesting to Demand Wages.
Many Chinese companies are unable to pay salaries & meet expenses due to economic woes, unsustainable debts & dwindling domestic sales. pic.twitter.com/LCYPJbGF4z

— Padma Namgail (@PadmaNamgail14) November 23, 2024

However, wage issues are not a new issue in China. In 2023, employees of state-owned companies said they hadn’t been paid for over 45 months, while pensioners said their promised benefits and medical insurance payments had been reduced.

“We haven’t been paid for 45 months.”
“We demand our wages, we want to work. Hundreds of employees demand our wages.”
In front of the Jilin Grain Group Co., Ltd., employees are protesting with banners. How have these people been able to survive without receiving their wages for… pic.twitter.com/8RGfNmfjcG

— Inconvenient Truths by Jennifer Zeng (@jenniferzeng97) September 18, 2023

#Guangzhou retirees protesting in front of the Social Security Bureau as their pensions and medical insurance payments were reduced.
Local governments in #China are having financial problems now. I talked about this here: https://t.co/P6HHpAxLPP pic.twitter.com/p7DOKuXv2r

— Inconvenient Truths by Jennifer Zeng (@jenniferzeng97) January 14, 2023