BEIJING (Reuters) – Millions of civil servants across China were given a surprise pay rise this week, people affected by the move said, as Beijing looks to boost spending to support a slowing economy.
On a combined basis, the immediate payout would amount to a one-time hit to the economy of between about $12 billion and about $20 billion if all 48 million people are counted as public sector workers collected under the terms described to Reuters.
The last time China publicly announced a nationwide salary increase for civil servants was in 2015, when the government raised salaries for local officials by more than 30% as part of efforts to fight corruption and boost spending power.
The State Council Information Office, which speaks on behalf of the Chinese government, did not immediately respond to a request for comment.
This time, monthly salaries for government officials were increased by an average of about 500 yuan ($68.50), according to people contacted by Reuters or who posted on social media. Some junior civil servants reported monthly raises of close to 300 yuan ($41).
In many cases, pay increases for officials and public sector workers were backdated to July and delivered in one bonus-like payment, people familiar with the matter said.
“Beijing’s strategy seems to be encouraging consumption by people who are more willing to spend,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
“So far we’ve seen cash given to the poor and public sector pay rises. Low-income groups tend to spend a higher proportion of their incomes, while civil servants are likely to spend more than private sector employees due to their higher levels of social benefits.”
The widespread pay hike, which hit teachers, police and civil servants working across China, was first reported by Bloomberg.
This move was not announced or described in detail by Beijing. It was not immediately clear how the increase would be financed or what the total cost would be.
Chinese leaders agreed last month to run a larger budget deficit this year, equivalent to 4% of gross domestic product (GDP), Reuters reported.
That would support efforts to reach a target of around 5% economic growth for 2025 despite resistance from a lingering housing crisis, falling prices and the possibility of higher tariffs on exports to the United States.
Civil servants have started posting on social media about salary increases on either side of the New Year holidays.
“It would be good for everyone if we can get out of deflation,” one person posted on Weibo (NASDAQ: ) from Jiangsu.
Others were critical. “How is it that you target a small group of civil servants and encourage consumption?” said a Weibo user based in Hubei.
A record 3.4 million young Chinese took the civil service exam last year, lured by job security at a time when the private sector is under pressure.
The number of applicants for the civil service has tripled since 2014, even as some local authorities have struggled to pay salaries, cut benefits and in some cases cut jobs.
A group of city workers in Beijing were told on Thursday that they would receive a salary increase of at least 500 yuan a month without further details, one of the workers told Reuters on condition of anonymity.
The good news prompted the team to go to a restaurant to celebrate, the person told Reuters. “This should help to increase spending,” she said.
