China’s crackdown on civil servant perks sparks economic concerns

Published: 13 August. the English Chronicle Desk. English Chronicle Online

Beijing’s recent austerity measures targeting civil servants and Communist Party officials have sparked concerns among economists and business analysts over their potential impact on the Chinese economy. The updated regulations, released in May, prohibit more than 40 million civil servants from hosting lavish banquets and restrict overseas travel for personal leisure. While intended to curb corruption, experts warn that these measures could inadvertently dampen domestic spending and slow retail growth.

Restaurants and hospitality venues near government offices have reported noticeably quieter business, with once-bustling establishments now struggling to fill tables during peak hours. Waitstaff at luxury restaurants admit that alcohol sales, particularly of baijiu – China’s national liquor long associated with official banquets – have significantly declined. The crackdown has already affected major brands like Kweichow Moutai, whose share price has dropped nearly 9% since May, erasing over 170 billion yuan in market value by the end of July.

The new regulations provide detailed guidance on official travel, both domestic and international, as well as the hosting of receptions and the use of official vehicles. Local authorities have moved quickly to implement these rules, with civil servants in Shandong province reportedly forbidden from dining out in groups larger than three, while cadres in Anhui province have been instructed to avoid social gatherings and refrain from treating colleagues to meals. Penalties are already being enforced: in June, two bank employees in Anhui saw their bonuses docked for attending a simple lunch paid for by a client.

Analysts argue that while the anti-corruption drive addresses long-standing political goals, it risks undermining efforts to stimulate domestic consumption. Guo Shan, an economist at Beijing and Shanghai-based Hutong Research, predicts that the policy could reduce retail sales growth by around one percentage point in the latter half of the year. Alfred Wu, a public policy expert at the National University of Singapore, adds that the restrictions will “definitely harm the economy,” highlighting the tension between political imperatives and economic vitality.

The tightening of controls extends beyond senior officials. Teachers and other lower-rank civil servants now face restrictions on overseas travel, often requiring official permission even for family holidays. Some regions have even demanded that public sector employees submit their passports, sparking frustration among ordinary citizens who view these measures as excessively intrusive. Social media posts on Weibo have reflected widespread confusion and concern, particularly from families of teachers denied travel rights.

Despite the economic implications, Beijing appears prepared to prioritize political and security objectives over immediate financial consequences. Guo Shan suggests that authorities are likely willing to absorb short-term economic disruption, relying on other tools to maintain broader growth if necessary. The ongoing crackdown demonstrates the government’s determination to extend regulatory oversight into the daily lives of public servants, reflecting a broader campaign to enforce discipline, curb corruption, and reinforce political control across all levels of China’s civil service.