Analysis:White-collar wage cuts in China fuel deflation risks, hurt consumption
BEIJING/HONG KONG: Cola Yao earns 40 per cent less than last year promoting credit cards for a Chinese state-owned bank, so she buys fewer clothes, less make-up and has cancelled her child's summer swimming classes.The unexpected austerity comes on the back of China's slowing economy, complicating efforts for Communist Party leaders who pledged this week to boost workers' incomes to revive household consumption, a major policy goal.
And, some indebted local governments have cut civil servants' pay. Some hospitals and schools, as well as some private businesses facing a drop in sales, have done the same. "Wage cuts will intensify deflationary risks and reduce willingness to spend," said Zhaopeng Xing, ANZ's senior China strategist.
The Economist Intelligence Unit's Xu Tianchen said that the increase was likely driven by rural migrant workers returning to factories after COVID-19 lockdowns, which compensates for subdued pay growth in white-collar jobs.
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