China's economic pressure: China Minsheng Bank's salary plummeted by 50%, the unemployment rate hit a record high in August, and Xi Jinping implemented austerity policies

In response to ongoing economic pressures, Minsheng Bank's Beijing branch has implemented significant salary reductions of up to 50% for its employees. This measure, part of the broader "tighten your belt" policy promoted by the Chinese government, also includes the suspension of certain work-related expenses and benefits.

With over 4,000 employees, the Beijing branch is the largest for Minsheng Bank, and this move represents one of the most substantial salary cuts within the local banking sector in recent years. Similarly, China Construction Bank also enacted salary reductions of at least 10% in July, highlighting a trend among commercial banks to cut costs amid economic difficulties.

Impact of Evergrande's Crisis

Minsheng Bank, established in 1996 as China's first privately held commercial bank, has faced severe challenges due to the ongoing real estate crisis. As one of the major creditors to the embattled Evergrande Group, the bank has seen its profitability further strained. The non-performing loan ratio for real estate loans rose to 5.29% in the first half of 2024, leading to a 5.5% year-on-year decline in net profit.

China's rising unemployment

In addition to corporate salary cuts, China's youth unemployment rate has reached alarming levels. In August 2024, the unemployment rate for non-students aged 16 to 24 hit 18.8%, the highest this year. This rise comes amid increased competition in the job market, particularly with around 12 million university graduates entering the workforce in June.

China’s youth unemployment rate for non-school students aged 16 to 24 has reached 18.8%. Image source: Caixin data

The Chinese government has suspended the release of youth unemployment data, raising concerns about the job market's state. A recent incident where a high school in Suzhou hired a 24-year-old physics master's graduate for a janitorial position has sparked discussions online, reflecting the growing difficulty high-education graduates face in securing suitable employment.

Government's "Tighten Your Belt" Policy

To address these economic challenges, the Chinese government has reinforced its "tighten your belt" policy. Announced during the National People's Congress in March, this initiative calls for local governments to adapt to a more austere financial environment, leading to stringent controls over administrative expenditures. Public sector employees have been particularly affected, with salary cuts initiated last year as part of these cost-saving measures.