Chinese Premier Tells Government at All Levels to ‘Tighten Their Belts’ as Economy Declines

A worker wearing a face mask works on a production line manufacturing bicycle steel rims at a factory as the country is hit by the novel coronavirus outbreak in Hangzhou, Zhejiang province, China, on March 2, 2020. China Daily via Reuters/File Photo

Chinese Premier Li Keqiang once again asked governments at all levels to “tighten their belts” when he spoke at a State Council meeting in Beijing on July 23. The State Council is akin to a government cabinet.

He mentioned that the economic downturn and exhorted officials at all levels to routinely exercise “diligence and frugality.”

In May, Li had mentioned “tightening their belts” and that the central government would cut over 50 percent of non-obligatory expenditures. Local governments would also run on tight budgets.

In a July 6 press release from the State Council, Li said there are “many idle factories” upon visiting a factory in Tongren city, in southwest China’s Guizhou Province.

This year, the Chinese Communist Party’s (CCP) fiscal revenue at all levels has fallen sharply. According to official CCP data, in the first half of the year, revenue at the central level fell 14 percent year on year, and local revenue fell 7.9 percent year on year. National tax and non-tax revenue fell 11.3 percent and 8 percent year on year, respectively.

As of July 26, 26 out of 31 provinces had deficits in the first half of the year.

Effects of the Pandemic and Declining Global Trade

The southern province of Guangdong, adjacent to Hong Kong, received the most attention lately. Ranking number one in economic development and financial volume among all provinces, its revenue in the first half of 2020 dropped by 5.8 percent. Because Guangdong is the number one province in foreign trade industries, the severity of the pandemic in foreign countries has heavily impacted its economy.

Closures of medium- and small-sized industries are said to be “uncountable” in Dongguan city. Known as the “factory of the world,” the area is home to many manufacturing plants for global firms. According to a report by Chinese news portal Sina on July 26, a Dongguan foreign trade company, in business for more than a decade, had to shut down certain factories and sell part of its production lines due to the lack of orders.

In another case, Panduit Toys, a major manufacturer of 28 years in Dongguan, had to close due to mass cancellations of foreign orders.

In a recent statement to its employees, the Goodwill Watch Case factory in Dongguan, announced that American watch brand Fossil has canceled its current and future orders, and thus all employees are on leave. The factory encouraged them to resign and noted that the company could “close anytime.”

Among other provinces, the fiscal revenue of Hubei Province, where the pandemic first broke out, dropped by 38.44 percent year-on-year. In Hainan, a province with a large tourist industry, and Heilongjiang, a major agricultural producer, fiscal revenue in the first half of the year fell by more than 20 percent year on year for both provinces.

The fiscal deficit of Henan Province in the first half of the year was 375.37 billion yuan ($53.6 billion); whereas Yunnan, Hubei, Hebei, Anhui, and Guangxi all had more than 200 billion yuan ($28.57 billion) of deficit.

No Problems for ‘Stability Maintenance’

Despite the tight budgets, funding for “stability maintenance” seems to be unaffected. The term is a euphemism for squashing dissent.

The Epoch Times recently obtained internal documents issued by Baoding City, in Hebei Province near Beijing, to various districts on May 20 this year. It stated that “public security organs’ public funds are fully guaranteed” and that authorities would “prioritize the implementation of public funds in police stations.”