China jobs: as the iron rice bowl starts to crack amid mounting debts, can civil servants still put bread on the table?

As China’s heavily indebted municipalities grapple with worsening fiscal conditions, the so-called iron rice bowl of secure jobs at public sector or state-owned firms have started to crack in some less populous regions amid a scaling back of the civil service.

Institutional restructuring in Guzhang, a county of 143,000 in the central province of Hunan, could include consolidating and merging various administrative departments, while staffing levels could also be downsized.

“[The goal is to] optimise administrative service efficiency, alleviate fiscal support pressures, and direct limited financial resources towards ensuring and improving people’s livelihoods,” Shen Xiaoming, Hunan’s Communist Party secretary said last month.

Guzhang is the least populated county in the province, but it has a comprehensive administrative infrastructure and nearly 4 per cent of residents are civil servants, much higher than the provincial average.

But as debt mounts without reliable sources of revenue, the county heavily relies on transfers and payments from higher-level authorities, mirroring the predicament faced by other small counties.

“Due to the simultaneous downturn in the real estate sector and the national economy, local finances are facing significant difficulties, and everyone is considering what to do next,” said Peng Peng, executive chairman of the Guangdong Society of Reform, a think tank connected to the government in the southern province.

“Excessive expenses on meaningless pursuits further exacerbated the burden on public finances and the challenges of maintaining essential public services, the government is burdened by heavy debt and lacks a solid basis for increasing borrowing.

“Tax cuts during the pandemic also made it challenging to grow revenue in the short term.”