What's even more worrying is that to allow 12 heavily indebted provincial governments to pay off their debt interests, the central government decided on August 22 to permit these areas to issue 1.5 trillion in special refinancing bonds. The condition is that local governments must cut 20 percent of public servant positions. Preliminary estimates suggest that nearly 5 million people will lose their jobs across these 12 provinces, taking a significant chunk out of China's consumer spending power.
Statistically, things look even worse. Flexible employment already make up a quarter of the national workforce, totaling 220 million people. Their incomes are not stable, limiting their spending power. Meanwhile, just in the first half of this year, as many as 460,000 companies have shut down, and 3.1 million individual businesses have chosen to deregister. A staggering 800 million Chinese people are facing debt, vividly illustrating the economy's downturn.
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