Workers in China face fresh wave of pay cuts amid economic malaise

New rounds of layoffs also expected in coming months as firms move to cut costs

- Aw Cheng Wei

Starting in October, project manager Andy Hong, who works at a state-owned technology company in Beijing, will have his salary cut by 4,000 yuan (S$740) or about 10 per cent.

This will be the 35-year-old's second pay cut since the start of 2024. In March, he had his salary reduced by 1,500 yuan because of "economic difficulties" that the country is facing, according to his superiors. Following the two pay cuts, Mr Hong's monthly salary will be around 35,000 yuan, before social and tax deductions.

"At this rate, I would be lucky if I have a bonus for this year at all, and if I can maintain my current salary level until December," said Mr Hong, who is using a pseudonym because employees at his company are forbidden to speak with foreign media.

Employees of state-owned enterprises (SOEs) in China have been facing pay cuts amid the current economic downturn, with workers telling The Sunday Times that they expect new rounds of wage deductions and layoffs in the coming months, given the release of lacklustre economic data on Oct 18.

China's economy grew 4.6 per cent between July and September in 2024, the slowest in 11/2 years. This brings the overall growth for the first nine months of 2024 to 4.8 per cent, and economists are sceptical that China will hit its goal of "about 5 per cent" for the year.

Business sentiment has been poor in the world's second-largest economy after Covid-19 pandemic restrictions were lifted in December 2022.

Widespread wage cuts across companies were reported as early as March 2023, as an increasing number of firms moved to reduce costs amid an economic downturn. SOEs, thought to be an "iron rice bowl", followed suit later that year. Wage cuts - more severe at private firms than at SOEs, and at as much as 50 per cent in the financial sector - followed a regulatory move that started in November 2023 to clamp down on fraud and manage systemic risks.