Insufficient demand creates a vicious deflationary cycle, which causes drops in wages and in and layoffs which in turn reduces demand even more, and the root of this problem is inequality of economic growth in China.2
While the CCP managed to make China the world’s second largest economy by adopting investment-led growth model which entailed state-led industrialisation by investing heavily in export-oriented manufacturing as well as large-scale urbanisation, however, it did so at the expense of Chinese households.
So, in order to make China’s industry more competitive to that of other countries, the CCP deliberately limited the growth in wages of its labourers. For instance, as of May 2025, the share of labour income in GDP annually in China was 51.4%, which is very low when compared to the roughly 56% in the United States (US) and the United Kingdom (UK), and around 59-60% in Canada, France and Germany.
The research undertaken by Professor Li Shi, the director of the Institute of Sharing and Development at Zhejiang University, which was made public in December 2024, categorized around 900 million individuals in China, which constitutes roughly 65 percent of the population, as low-income earners, earning less than 3,000 yuan (around US$ 412) per month. Also, there is a stark income inequality within this demographic, with some individuals earning amounts close to the middle-income level while others continue to live in relative poverty.
Professor Li’s findings correspond with the remarks made by former Chinese Premier Li Keqiang in 2020, wherein he said that around 600 million people in China, which represents 40 percent of the country’s population, were earning a monthly income of only 1,000 yuan (approx. US$ 137). Li’s claims were also seconded by China’s National Bureau of Statistics days later.
Moreover, despite its socialist ideology, the CCP has traditionally held back from providing social benefits to its citizen, as it prioritized the country’s resources for developing high-tech industries. This includes even Xi Jinping who has publicly expressed his reservations against overly generous provision of social services.
“Promoting common prosperity cannot be achieved through welfare programs. In the past, some Latin American countries pursued populism, and high welfare policies fostered a group of “lazy” people and those who did not work, resulting in unsustainable national finances and falling into the “middle-income trap,” from which they have been unable to extricate themselves for a long time. Once welfare benefits are raised, they cannot be lowered; welfare programs that exceed our capabilities are unsustainable and will inevitably lead to serious economic and political problems!”, said Xi in a speech delivered during the Central Economic Work Conference (CEWC) in December 2021.
So, this aversion of CCP leaders to welfarism reflects in the PRC’s lack of expenditure on social safety provisions. Consequently, the social safety net in China is considerably behind global standards, especially when compared to those of developed and even some middle-income countries, forcing the Chinese citizens to make up for the deficiencies in healthcare systems, education, support for children and the elderly, etc.
Let us take healthcare for example. As of 2022, the total expenditure on healthcare in China was only 7.05% of GDP, which is very low when compared to the 16.63% in the US and roughly 10-12% in Canada, the UK, Japan, France, and Germany. More importantly, the share of ‘out of pocket’ expenses in China’s total health expenditure for the same period was 27%, which is significantly higher than the 10-13% observed in the G7 countries with the exception of Italy which had 18%.
This means that a substantial portion of the financial burden for healthcare-related expenses is placed on individual Chinese households than on pooled funds like public health insurance schemes or subsidies from government’s own tax revenue.
Also, the benefits from the existing public health insurance schemes weigh heavily in favour of the citizens in urban centers that are employed in the formal sector and government employees, resulting in only limited provision of social welfare to farmers and migrant labourers.
So, there are two public health insurance options available to Chinese citizens, 1) the Urban Employee Basic Medical Insurance (UEBMI), which covers the urban citizens and the retired employees of state-owned enterprises as well as the current employees of some private-sector enterprises, and 2) the Urban and Rural Resident Basic Medical Insurance (URRBMI), which covers the urban dwellers and rural citizens.
As of 2023, the URRBMI, which covered 72.19% of all insured citizens in China, spent only 37.07% of the total health insurance fund, meaning the remaining 63% of healthcare costs paid by the public insurance funds were used for the 28% of the population covered by UEBMI.
Also, among those aged 60 and above, around 200 million individuals, which is two-thirds of this demographic, were found to be ineligible for UEBMI benefits as of 2023.
So, the lack of access to social benefits coupled with anaemic growth in incomes forces the rural families and urban dwellers in China to maintain high savings. As of 2018, China’s net household savings as a percentage of household disposable income was 34.82%, which is 3-5 times more than the 7-8% observed in US, France and Germany for the same time period.
Due to such high savings, Chinese households lack the purchasing power needed to provide sufficient demand for China’s industry, forcing the later to rely on exports for economic growth, however, in recent years, countries worldwide are erecting trade barriers to protect their domestic industries which is slowing the global demand for Chinese products.
So, overall, the aggregate demand for Chinese products has been waning in the past few years, resulting in the overcapacity problem for China’s industries which in turn is leading to shrinking profits, pay cuts, insolvency, factory closures and layoffs, thereby also causing lower tax receipts for the Chinese government, as is evident from the lower fiscal revenue projections for 2025 in the Chinese MoF’s budget report submitted to the NPC in February 2025.
These sustained poor economic conditions have also prompted a surge in protests connected to national macroeconomic crises throughout China, in the three years since the Chinese government brought an abrupt end to its COVID-19 lockdown policies.
Increasing Social Unrest In China Due to Economic Hardships
Per the data from Hong Kong-based nongovernmental organization, China Labour Bulletin (CLB), protests due to wage arrears accounted for 73% of all protests in China from 2011-2022 which rose to 87% in the period of only two years since 2023. This is partly a consequence of a trend in China set by the economic downturn, wherein the employers often choose to delay wage payments for several months, and use the promise of full repayment to discourage employees from resigning.3
Overall, in 2023-24, the number of labour-related protests rose to 3,297, a peak not seen since the 2015-16 Chinese stock market and real estate crashes, during which CLB noted 5,446 protests over two years. This spike in labour-related protests points to an escalating dissatisfaction among workers, reminiscent of previous economic challenges in 2015-16.
The China Labour Bulletin (CLB) ceased operations and announced its dissolution on June 12, 2025, citing financial difficulties and debt issues, so we do not have CLB’s data for 2025 but according to the China Dissent Monitor (CDM) which tracks a broader range of protests, there were 1,219 labour-related protests in the first half of 2025, marking a 66% increase over the same period in 2024.
Furthermore, in the third quarter (July–September) of 2025, labour-related protests constituted 38% of all dissent events logged by the CDM, making labourers the largest group of protesters during that quarter. Also, per the CDM’s breakdown for this quarter, protests due to economic grievances constitute around 82% of all protests in July-September period.
These economic grievances include unpaid wages, factory closures, labor disputes, stalled housing projects due to severe financial crisis in the real estate sector, unpaid wages of teachers and school closures or mergers due to funding shortages caused by the financial strain over the local governments, and disputes over land compensation and land confiscation by the developers and local governments in the rural regions.
Also, while the vast majority of protests in China in the post-pandemic period have been due to labour and housing disputes, some protests have also been due to concerns related to the environmental pollution and according to an article citing David M. Lampton, an expert in Chinese politics, two-thirds of protests in the unspecified number of years leading up to 2020 were due to anger over local pollution.
For instance, in 2012, a minor protest against the proposed expansion of a Sinopec facility in Ningbo, Zhejiang, rapidly expanded from rural farmers to urban dwellers, and resulting in altercations between the protesters and police forces. While the government did concede and moved the planned facility to another location, this was only a limited achievement as the plant was constructed in close proximity.
Other than economic hardships and environmental concerns, there have also been protests from time to time due to corruption among local CCP cadre who are the primary point of contact with the Party for Chinese citizens.
According to a survey by Ash Center for Democratic Governance and Innovation at Harvard University on public satisfaction with government in China, conducted in 2016, there was significant disparity among Chinese citizens in their trust levels in local and central governments with over 90% of citizens rating the Central government as “trustworthy” while only around 58.9% expressing trust in the local leaders.
That said, the continued escalation of protests driven by economic hardship throughout China in the post-pandemic period indicates that the anxiety within the population due to country’s economic downturn is broadening, which if goes unchecked, could potentially become a national, unifying theme against the central government as well, thereby significantly eroding the CCP’s legitimacy among the Chinese populace.
The overall count of protests in China, attributed to different causes in 2024 as reported by the CDM, was 1,465. This number has risen to 5,014 in 2025, representing a spike of more than three times in only one year.
Should these protests become more unified and organized, fostering networks of leaders throughout the country, they could culminate into nation-wide mass protests that could potentially even come to threaten the CCP’s continued rule over China.
Now, one could argue that this is an overly cavalier suggestion on part of the Author which overlooks the CCP’s extensive investments over the years in a wide-ranging security apparatus and censorship systems that it can use to quell such mass uprisings. However, the Author must emphasize here that there limits to the use of force in containing public dissent.
One must be mindful of the fact that heavy-handed handling of dissent can sometimes backfire by further escalating the situation.
For instance, in May 2011, a Mongol herder by the name of Mergen was killed while protesting polluted ground caused by mining operations in the Inner Mongolia Autonomous Region (IMAR). He was obstructing a convoy of a mining company, Liaoning Chencheng Industry and Trade Group, from passing onto his pastureland, when a Han Chinese coal-truck driver run him over, resulting in his death.
His death sparked further demonstrations with around thousands of students together with nomadic herdsmen participating in organised protests at different locations, including at the Communist Party headquarters of the West Ujimqin administrative division and government buildings in Xilinhot.
By this point, the themes surrounding the protests had transitioned from the death of a herdsman to shared concerns regarding the environmental degradation of the Inner Mongolian grasslands and the safeguarding of the ethnic Mongols’ homeland.
The situation was contained by the local authorities by briefly instituting martial law in the region, however, this should serve as an example of how use of force in quelling protests can backfire.
Thus, it is not beyond the realm of possibility that if mass uprisings re-emerge in China, they may at some point of time become too overwhelming for the CCP to contain and could eventually even result in its ouster from power.
The CCP Understands The Threat From Rising Social Unrest Due To Economic Hardships
Experts in China as well as the CCP leaders seem to understand the risks emanating from grievances within the Chinese populace to the Party’s continued rule, going by the implicit acknowledgement of the threats from the ‘social contradictions’ – to the “stability of the state power, political system, and social and political order” in the official literature.
So, the term ‘social contradictions’ (or 社会矛盾) is a euphemism in the CCP’s official lexicon used to refer to the domestic issues such as internal tensions, grievances, conflicts, or social problems, which if left unresolved, threaten the fundamental ‘social stability’ or (社会稳定) of the regime, and by extension, the CCP’s continued rule over China.
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