As the Chinese government implements stringent austerity guidelines targeting the institutional sector, concerns are growing that these measures conflict with consumer stimulus policies. Some local governments have effectively banned public servants from dining out, significantly affecting related industries.

Customers dine at a restaurant in the old town of Dali. /Courtesy of Reuters-Yonhap

According to the Hong Kong South China Morning Post (SCMP) on the 9th (local time), the Chinese government recently implemented restrictions on drinking and dining for public servants to eliminate wasteful practices and corruption. However, local governments have been interpreting these measures too strictly, leading to significant economic repercussions. Analysis shows that frontline public servants are avoiding not only banquets but also everyday meals and private gatherings, which is striking a direct blow to the dining industry and consumer market.

In fact, in some regions, cases have emerged where public servants are required to use breathalyzers daily or restaurants are rewarded for reporting whether public servants have dined there. As a result, there is a prevailing atmosphere discouraging public servants from even private dining, raising concerns that this is spreading a sense of anxiety within the private economy.

Chinese economists noted, "The more public servant consumption accounts for a large proportion of regional economies in smaller cities, the greater the impact will be," adding, "If consumer sentiment contracts, it will be contrary to the government’s ongoing domestic market expansion strategy."

Recently, the Chinese government has begun to amend guidelines to rectify these excessive regulations and has urged localities to exercise restraint. State-run media such as the People’s Daily have also indicated that "policies meant to be used as a scalpel are being misused like a hammer in some regions," drawing the line against excessive control.

Nonetheless, the anxiety among public sector workers remains distinct. On Chinese social media, wedding planners are expressing their grievances over cancellations of banquets by public servant clients, while the stock prices of premium liquor companies, such as baijiu, continue to decline.

The Economist Intelligence Unit (EIU) analyzed that "government and institutional sector expenditure accounts for half of China's restaurant sales; if these expenditures decrease by 10%, total retail sales could drop by 0.6%." In fact, during a similar austerity measure in 2013, restaurant industry sales plummeted by 4.6 percentage points.

Experts point out that although this measure may be an inevitable decision taken amidst economic tension, the excessive enforcement by local governments is revealing structural problems. She Qinghe, head of the Guangdong-based think tank Zhiyuan, criticized that "the local economic model, which overly relies on public consumption, has reached its limits."

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