China is truly out of money! Salary cuts, layoffs, and deflation have become the norm

Serve the people or feed the people feces. The fecal water incident in Hangzhou and lead-poisoned children in Gansu Shock, China. The CCP's efforts to suppress and silence the public spark outrage. China is truly out of money. Civil servants are devastated, pilots are taking side jobs, delivering food, salary cuts, layoffs, and deflation have become the norm. China's U.S. exports are stuck and piling up, leaving businesses facing a dilemma. Flee or shut down is a 100% tariff hammer incoming. The AI computing bubble in China is on the verge of bursting. Mass production, poor quality, AI and smart computing centers are failing. The CCP claims China is the safest country in the world. Netizens mock. Number one in the world for vehicular attacks and the highest rate of organ theft. You're watching Decoding China, where we bring you timely analysis and grounded perspectives on today's China. Serve the people or feed the people feces. The fecal water incident in Hangzhou and lead-poisoned children in Gansu Shock, China. The CCP's efforts to suppress and silence the public spark outrage. As we previously reported, two major public safety incidents have recently unfolded in China, sparking widespread concern and frustration among citizens. The first was the discovery of elevated blood lead levels in hundreds of kindergarten children in Tianshui, Gansu Province. This was followed closely by what has come to be known online as the Hangzhou Fecal Water Incident, where residents in several urban districts reported that their tap water was discolored and emitted a strong, foul odor. A blogger lamented, From yesterday until now, we've been dealing with two types of water pollution, and this situation has everyone on edge. Several of my friends have reported a foul smell coming from their homes. One friend even experienced stomach issues because the smell is so overpowering. Some have jokingly said it's like turning Hangzhou into Bianzhou, with a stench like feces. People are rushing to buy bottled water because the tap water is undrinkable and causes stomach problems. Netizens have observed that the water indeed smells bad, and when wiped with a tissue, it leaves a residue that resembles feces. One user shared, Let me show you what the tap water looks like today. Authorities responded quickly. On July 19th, Xinhua News Agency released a report citing the conclusion from Hangzhou's Yuhang District. According to the official statement, the issue was not caused by sewage contamination, but rather by algae decomposing under intense sunlight inside the water pipes, forming a substance known as sludge flow that affected the water's color and smell. However, this explanation was met with widespread skepticism. A document allegedly a leaked internal police notice circulated online, claiming that 13 main water pipelines had been mistakenly connected to sewage lines due to an act of internal sabotage by a disgruntled engineer. Although the memo was later labeled unauthenticated, many noted that its technical details matched real conditions in Hangzhou's infrastructure, suggesting the source may have had insider knowledge. Public anger quickly escalated. Online, netizens coined a bitter parody of the Chinese Communist Party's official motto, Serve the People, twisting it into Feed the People Feces, a scathing reflection of their outrage and helplessness. The question arose, Was this a one-off accident or the product of deeper systemic decay? A blogger warned, This water pollution issue in Hangzhou is particularly concerning because there are food processing factories in the area. Ordinary people can buy bottled water to cope, but these factories don't stop production. This means their products, like beverages and instant noodles, are distributed nationwide. It's no longer just a local issue. This has everyone scared. Yuhang's water department responded that only the odor indicator was abnormal, while other indicators were normal and the water was overall clear and clean. After deliberation, they decided to offer affected users a five-ton water fee exemption for July. Equivalent to about ¥15 at ¥3 per ton. To compensate for losses. Netizens mocked this, saying that five tons of water might flush the sewage from the pipes but won't erase the psychological trauma for Yuhang residents. Signs indicate that Chinese authorities are now suppressing the spread of related information, with videos and comments being removed or restricted. Some individuals have even been blacklisted by official websites. According to reports from external state media, Water quality data released by the Yuhang district authorities in Hangzhou show that in May this year, the coliform bacteria count at the Tiaoxi-Yongsheng water intake point surged 730 times. In June, the count at the same intake point reached 16,000 mpn most probable number. Additionally, two local reservoirs recorded even higher levels at 28,000 and 24,000 mpn. Netizens have exclaimed that it seems local residents have been drinking sewage water for over a month. As of now, the Yuhang tap water incident continues to escalate. Some netizens sarcastically remarked that beer, beverages, and other products from Hangzhou are being shipped nationwide by trucks, so everyone has a chance to taste them. Liu Ao, a Chinese-American, commented that this situation is reminiscent of the COVID-19 pandemic, where the Chinese Communist Party suppressed and silenced the truth, as they have done with various incidents. He cited the unresolved case of the chained woman as another example, adding, It's quite scary. To be honest, water supply alarms have been raised in places like Beijing, Hangzhou, Guangzhou, and Hebei. Statistics show that many diseases originate from water, especially in areas hit by heavy rain or floods, where water becomes cloudy, yellowish, and foul-smelling, mixed with industrial residues and various bacteria. China is truly out of money. Civil servants are devastated. Pilots are taking side jobs, delivering food. Salary cuts, layoffs, and deflation have become the norm. A woman remarked, I just saw in the news that China Construction 3rd Bureau is laying off 30% of its staff, and China Construction 8th Bureau only pays wages once every three months. I have many classmates working there. Isn't it supposed to be an iron rice bowl? China's economy continues to slump, with local governments facing budget deficits. Many regions report salary cuts for civil servants, and even retired teachers and doctors are experiencing significant income declines. Some regions have introduced policies encouraging civil servants to take on side jobs. Netizens have lamented. The Chinese government is really out of money. Due to widespread salary cuts and unemployment across various industries, a food delivery craze has swept China. Many civil servants, pilots, and even master's degree graduates who cannot find jobs have joined the ranks of food delivery workers. A blogger stated, In Suzhou, there's talk that the government might tighten salaries for public sector workers. The salary cuts range from about 20 to 30% annually. Do you know why this is happening? On one hand, it's due to the economic downturn, which is reducing the financial burden of supporting public sector workers. On the other hand, it's part of implementing common prosperity to adjust the incomes of high-earning groups, particularly those in the public sector. I have a classmate who works at a maternal and child health hospital. He says they barely admit a few pregnant women each month, and their department hasn't paid salaries for several months. I also have a friend in the banking system. Due to the current economic environment, more people are saving money than borrowing. So the era of profiting from interest rate spreads is over. Their salaries have been slashed in half. So, you see, these iron rice bowl jobs that everyone envied a decade ago don't seem so enviable anymore. In the past, civil servants were envied because the iron rice bowl was considered stable, guaranteeing a lifetime of security. However, in reality, civil servants earn only about $4,000. $5,000 when approximately $600 USD a month, which is insufficient, especially when supporting elderly parents and children. Mr. Sun, a public sector worker in Suining, Sichuan, received a notice from his workplace stating that public institution staff could take on side jobs. As a result, he decided to deliver food. Mr. Sun explained that after work, he starts taking orders around 8 p.m., working about three hours a day and earning over 100 yuan, approximately $14 USD daily. In recent years, China's job market has been sluggish, leaving many with no choice but to rely on food delivery to make a living. Since being a delivery rider requires no high level education or specialized skills, just hard work. It's not only civil servants, but also pilots and master's graduates who cannot find jobs joining the food delivery ranks. Happy Airlines has completely suspended operations, and many flight attendants and pilots have turned to street vending or food delivery. Meanwhile, ordinary residents are directly experiencing deflationary phenomena in society. Mr. Meng, a resident of Shandong, told Radio Free Asia that the wave of salary cuts has led to shrinking incomes, severely weakening consumer spending power. Many small businesses, struggling to survive, have been drawn into price wars, and restaurants are desperately offering discounts to stay afloat. Wu Qinxi, an economist from Jiangsu, analyzed that the current domestic situation from salary cuts in the public sector to the collapse of consumer spending among ordinary citizens has quietly formed a top-down chain of contraction across society. He further warned that if tight living becomes the norm, or even turns into no days to live, then society's resilience and confidence will truly face an extreme test. A report from Nikkei Asia's Chinese website also highlighted that China's Consumer Price Index CPI has seen consecutive months of negative year-on-year growth, signaling growing concerns about deflation in China. The report noted that Chinese citizens are avoiding high-end restaurants in favor of cheaper eateries and takeout. To the extent that even coffee chain giant Starbucks has lowered prices for tea beverages and other items in its China stores starting in June this year. In fact, regions such as Xinjiang, Shen Yun, and Chongqing have announced the suspension of policy subsidies because the initial funds allocated for subsidies were depleted faster than expected, and the government has run out of money. The report warned that the employment situation for Chinese youth is dire, with a record 12.22 million college graduates this year. If the current job difficulties persist, they will have a negative impact on the recovery of consumer spending. China's U.S. exports are stuck and piling up, leaving businesses facing a dilemma. Flee or shut down is a 100% tariff hammer incoming. At the end of July, a TikTok user working in China's export industry posted a video highlighting the severe impact of the ongoing U.S.-China tariff war. The user revealed that their clients' goods, destined for the U.S., have been stuck in a warehouse since April, unable to be shipped, and simply sitting idle. They expressed uncertainty about how many factories are currently facing inventory backlogs due to the tariffs, particularly for U.S.-bound goods. These piles of goods are a direct result of the tariffs, leaving distributors without profits and shippers unable to cover the tariff costs. Consequently, the goods remain stranded, with little hope for improvement in the near future. Since April, during the second round of the U.S.-China trade war, a temporary 90-day truce was agreed upon. However, during this period, most Chinese goods exported to the U.S. are subject to a 55% tariff rate, according to White House officials. This rate comprises a baseline 10% reciprocal tariff applied to nearly all U.S. trade partners, a 20% tariff targeting imports from China, Mexico, and Canada as part of anti-fentanyl measures, and a 25% tariff from Trump's first term specifically targeting China. The current truce is set to expire on August 12th. Foreign-owned businesses are also accelerating their exit from China. In early July, another blogger in the foreign trade industry shared their struggles, stating that this year has been particularly challenging. They visited an old client who manufactures shoes and learned that three of the client's suppliers went bankrupt this month. The client explained that since the imposition of tariffs by the Trump administration, their orders have significantly decreased. In Zhongshan alone, at least 1,000 denim factories have closed this year. Many businesses, even those that appear successful, are experiencing a false sense of prosperity with no real profit. While last month's orders were manageable, this month has seen none, leading to weak, long shutdowns. Factory owners are desperate for new orders. But for many, the only option is to close entirely. Regions like Jiangsu, Zhejiang, and Shanghai are also facing order shortages, with even an 80 million yuan factory choosing to shut down. Both large and small factories are closing their doors. Recently, a major factory in Dongguan, Celestica Guangdong Technology Limited, which once employed thousands, announced its closure overnight. Another company in Foshan, specializing in doors and windows, also shut down abruptly. On July 3rd, a printing company owner from Zhongshan City, Guangdong, visited the abandoned Aotai factory and filmed its empty halls, a stark contrast to its once grand ambitions. A well-established foreign trade lighting company in Foshan has shut down. Another printing and packaging company in Foshan is in liquidation. And a leading semiconductor packaging company in Shenzhen has announced a two-month break with no confirmed resumption date. Manufacturing is currently facing immense challenges. Factories have no work, and owners are struggling to sleep at night. Workers are also suffering without work. They have no income. Factories face two stark choices, lay off workers or shut down entirely. As a result, many people are on the verge of unemployment. Unfortunately, the channels China previously used for transshipment, particularly Vietnam and Southeast Asia, have largely been blocked by US tariffs and policies. Vietnam is one of China's most important transshipment hubs. On July 2nd, the US reached a preliminary trade agreement with Vietnam, imposing a 20% tariff on goods exported to the US, but a 40% tariff on goods transshipped through Vietnam. This regulation primarily targets Chinese goods to curb transshipment trade used to circumvent US tariffs. Given the current international situation, foreign trade factories and companies face an uncertain future and must prepare for a strategic battle with the US. The US-Vietnam trade agreement serves as a reference and a warning to other Asian countries, such as India, Thailand, and Indonesia, which are currently negotiating with the US. Current affairs commentator Tang Hao pointed out that with China's domestic demand weakening and investment growth reaching its limits, exports remain crucial for economic growth. However, Trump plans to sign trade agreements with dozens of economies in July and August, forming a global tariff alliance centered around the US. If this alliance takes shape, not only will China's exports to the US be severely impacted, but other countries may also increase tariffs on Chinese goods. Tang stated that without significant improvements in investment and domestic demand, relying on export-driven economic growth will no longer be feasible, and China's economy will face severe challenges and a significant blow. The AI computing bubble in China is on the verge of bursting. Mass production, poor quality, AI and smart computing centers are failing. Starting October 17, 2023, the US began gradually restricting the sale of Nvidia chips to China, including the A100, A800, H800, H100, and H200 models. Recently, the last Hopper series chip permitted for export to China, the H20 was added to the restricted export list. The H20 is a customized version of Nvidia's AI chip designed for the Chinese market. After the US banned H800 chip sales to China in 2023, Nvidia launched the H20 model, which complies with the US Department of Commerce's export administration regulations, but offers only about one-third the performance of the H100. Major buyers of the H20 include ByteDance, Tencent, and Alibaba. Since taking office, President Trump has considered banning Nvidia's H20 chip exports to China. On May 13, the US Department of Commerce officially revoked Biden-era rules on AI technology diffusion and introduced stricter export controls. According to a statement by the department's Bureau of Industry and Security on the same day, a series of measures were announced to strengthen overseas AI chip regulations, including three key guidelines. First, explicitly stating that using Huawei's Ascend AI chips anywhere in the world violates US export control regulations. Second, warning the public of potential risks in training or running Chinese AI models with US chips. And third, urging US companies to enhance safeguards to prevent supply chain transfers or regulatory evasion. Trump's latest policies clearly aim not only to stop advanced technology from flowing to China, but also to curb China's potential to build overseas tech ecosystems. Mainland China's AI computing boom surged between 2022 and 2024 with many computing centers rapidly constructed. Data shows that in 2024 alone, over 458 AI computing center projects were initiated, aligning with the Chinese Communist Party's push for a technological leap toward becoming a science and technology powerhouse. However, the frenzied graphics card speculation and AI computing boom did not last long. By late 2024, especially after domestic models like DeepSeek emerged with high cost performance ratios. Many power suppliers relying solely on stockpiling cards or lacking core technology support found it increasingly difficult to sustain operations. The AI computing bubble in China is showing signs of bursting. Statistics indicate that in the first quarter of 2025, China had 165 AI computing center projects with new activity. Of these, 58% remained in the approved or planning stages, 33% were under construction or nearing production, and less than 10% were operational or in trial runs. According to data from the Chinese tech industry, think tank Jazeer, in the first half of 2024, nationwide AI computing centers had a total capacity of 1.7 billion GPU hours, but actual usage was only 560 million GPU hours, resulting in an overall utilization rate of just 32%. Online reports reveal that the average data center occupancy rate currently hovers between 20% and 30%, with some enterprise-level AI computing centers operating at around 10%. Ho Won, an AI data center professional in mainland China, explains that these computing centers primarily serve large model enterprises. The oversupply and declining profits in China's data center industry are primarily driven by weak demand. Ho identifies several reasons for this. First, the internet growth dividend has peaked, with markets for platforms like WeChat, Douyin, and Taobao becoming saturated, and the demographic dividend has ended. Second, the sluggish domestic economy has made companies cautious about IT spending, dampening demand for cloud services and digital transformation. Local officials treat AI computing centers as new infrastructure to boost economic growth, while speculators exaggerate promising returns to secure initial investment and construction quotas. These speculators often use the investments as seed money to create numerous special purpose vehicle companies to apply for bank loans and obtain financing. Many speculators behind AI computing center projects collude with various parties to create fake leases, successfully securing bank loans to report favorable results to the government. Some have also found a secondary business for these computing centers, cryptocurrency mining. However, mining causes extreme wear and tear on computing equipment, which may become unusable after just two years. An AI large model integration platform recently released its 2025 AI spring model usage trend report, showing that the usage of China's once popular DeepSeek R1 dropped from a peak of 7% in February to 3% by the end of April. Poe analyzed that its viral momentum has weakened and user retention has not been sustained. The report also shows that OpenAI's GPT 4.1 saw a surge in usage after adding text to image features like the Ghibli style, quickly capturing a 9.4% market share within weeks of release. Google's Gemini 2.5 Pro also experienced rapid market share growth. On PTE's stock board, users commented that if DeepSeek R2 doesn't launch soon, it's doomed, noting no updates on reasoning capabilities or multimodal features. Many users criticized DeepSeek, saying things like, you can't ask about sensitive topics, what's the use? It's too slow and inconvenient. And once you try it, you'll see users only stick to what works. Cheap and ineffective options are useless. Everyone goes back to GPT and Grok. Some pointed out that Chinese open source models are indeed strong, but surpassing American giants is nearly impossible due to hardware limitations. Currently, China's AI computing industry can only be considered an ecosystem nurtured through self-sufficiency. In other words, China's AI computing centers and AI development resemble the 1950s mass steel production campaign during the Great Leap Forward, when the Chinese Communist Party mobilized people to melt pots and pans in the fields. But steel production failed. This also echoes the domestic substitution drive following US chip export bans, which led to the construction of many chip industrial parks that attracted numerous unqualified companies into the integrated circuit industry, resulting in numerous unfinished projects. This massive bubble in China is nearing its burst and may become yet another grand initiative that is impressive on the surface, but ultimately fails. The CCP claims China is the safest country in the world. Netizens mock. Number one in the world for vehicular attacks and the highest rate of organ theft. As China's economy declines and social unrest grows, violent incidents are becoming more frequent. Yet the Chinese Communist Party's Ministry of Public Security claims that China is one of the safest countries in the world. As recognized globally, netizens have mocked this claim, sarcastically stating that China is number one in the world for vehicular attacks. On July 23rd, the State Council Information Office of the Chinese Communist Party held a press conference where Vice Minister of Public Security Qi Yanjun declared that China has one of the lowest homicide rates, criminal offense rates, and gun or explosive-related crime rates in the world, making it one of the safest countries globally. Li Yuanhua, a scholar based in Australia, commented, they want to use data to prove they're the best, and they can completely fabricate statistics. For example, when someone retaliates against society by driving into and killing many people, in their records, this is classified as a traffic accident, not a homicide. They're playing all sorts of tricks, and their numbers are not credible. Qi Yanjun's remarks sparked ridicule on overseas social media. Netizens sarcastically commented, drinking sewage water every day, with a million people going missing each year truly safe, and forget everything else if school bullying cases were properly documented, China would rank first. Some netizens also mocked that China is number one in the world for vehicular attacks and the country with the highest rate of organ theft. Additionally, the Chinese Communist Party banned civilians from owning firearms, with possession punishable by up to three years in prison. Chinese human rights lawyer Wu Xiaoping stated, ordinary people have no right to bear arms, so gun or explosive-related cases are naturally low. However, violent incidents occur frequently, with random killings on the streets becoming common, knives have become tools for crime, and vehicles have become weapons. Social hostility is intense, and the Chinese Communist Party is so afraid, that even kitchen knives require real name registration. While in Xinjiang, knives are literally locked up. These objective facts reveal that crime and lawlessness in Chinese Communist Party, controlled China, are extremely high. So the party resorts to extreme measures to control the entire society. Your feedback matters. Share your views in the comments. If this content resonated with you, we invite you to share it with your network. Your continued support empowers us to pursue independent, high-quality journalism. Subscribe and like to stay up to date with Decoding China. Thank you for watching.