1 Shaoxing City’s catering policy adjustment hints at broader economic malaise
Local gov’t issues handouts to stimulate catering industry
Sept. 2
The local government of Shaoxing City in Zhejiang Province held a press conference to introduce 15 measures to boost consumption in the city for 2025. Noteworthy points in the announcement include:
- The Shaoxing government plans to allocate 178 million yuan to support the measures.
- The Shaoxing government will subsidize those who hold banquets of five or more tables in hotels and spend at least 10,000 yuan. Subsidies will be granted in tiers based on the hotel’s sales invoice (inclusive of tax), and are capped at 5,000 yuan.
- The Shaoxing government will roll out broader initiatives to stimulate catering consumption further. These include allocating more than 100 million yuan for consumption-boosting policies in the business sector, with consumer vouchers focused on automobiles, supermarkets, and catering.
- To promote nighttime economic activity, the Shaoxing government will hand out a one-time award of 200,000 yuan to business operators whose number of extended-hour shops reach a certain scale. Also, enterprises that open 24-hour convenience stores or community supermarkets will be given a one-time subsidy of 20,000 yuan, with the total annual subsidy for each business capped at 200,000 yuan.
- The Shaoxing government will allocate 7.6 million yuan in special funds to provide subsidies to university students in the form of consumer vouchers. Each student can receive discounts of up to 500 yuan to directly offset part of their spending in Shaoxing on dining, accommodations, and supermarkets.
August data shows three years of deflation
Sept. 10
The PRC National Bureau of Statistics released China’s consumer price index and producer price index data for August 2025:
- The CPI fell 0.4 percent year-on-year and remained flat month-on-month.
- The CPI’s move into negative territory after being recorded as flat in July signals that deflationary risks have shifted from latent to visible.
- The average CPI declined by 0.1 percent year-on-year for the January-August period.
- The PPI declined 2.9 percent year-on-year and remained flat month-on-month.
- While the drop in China’s PPI narrowed by 0.7 percentage points in August compared with the decline of 3.6 percent in July, the overall trend still reflects the chronic problem of oversupply and weak demand.
- The purchasing prices for industrial producers (PPIRM) fell 4.0 percent year-on-year and remained flat month-on-month.
- During the January-August period, the PPI dropped 2.9 percent year-on-year and the PPIRM fell 3.3 percent year-on-year.
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The official consumption data for August marks three consecutive years of deflationary pressures in China. Having both the CPI and PPI stuck in negative growth since 2023 — the first such instance since the start of the PRC’s “reform and opening up” — reflects the interplay of collapsing domestic demand, structural imbalances, and policy dilemmas.
PBoC August data shows weak consumption, investment
Sept. 12
The People’s Bank of China released China’s financial and social financing data for August 2025.
Money supply
- Broad money supply (M2) increased 8.8 percent year-on-year to 331.98 trillion yuan in August.
- Narrow money supply (M1) increased 6 percent year-on-year to 111.23 trillion yuan in August.
Loans
- New renminbi loans grew by 13.46 trillion yuan in the January-August 2025 period, compared with an increase of 14.43 trillion yuan in the same period a year earlier.
- Household loans rose by 711 billion yuan, compared with an increase of 1.44 trillion yuan in the same period last year.
- Corporate and institutional loans grew by 12.22 trillion yuan, compared with an increase of 11.97 trillion yuan in the same period last year.
- New RMB loans increased by 590 billion yuan in August 2025, compared with an increase of 900 billion yuan in the same month the previous year.
- Household loans rose by 30.3 billion yuan, compared with an increase of 190 billion yuan in the same period last year.
- Corporate and institutional loans rose by 590 billion yuan, compared with an increase of 840 billion yuan in the same period last year.
Deposits
- Total new deposits grew by 20.50 trillion yuan during the January-August 2025 period, compared with an increase of 12.88 trillion yuan in the same period last year.
- Household deposits rose by 9.77 trillion yuan, compared with 9.65 trillion yuan last year.
- Deposits of non-financial enterprises rose by 610 billion yuan, versus a decline of 2.88 trillion yuan last year.
- Fiscal deposits grew by 2.21 trillion yuan, compared with an increase of 960.6 billion yuan last year.
- Total new deposits grew by 2.06 trillion yuan in August 2025, compared with an increase of 2.22 trillion yuan in the same period last year.
- Household deposits increased by 110 billion yuan, compared with 710 billion yuan last year.
- Deposits of non-financial enterprises grew by 299.7 billion yuan, compared with 350 billion yuan last year.
- Fiscal deposits increased by 190 billion yuan, compared with 558.7 billion yuan last year.
Aggregate social financing
- Total social financing increased by 26.56 trillion yuan during the Jan-August 2025 period, or 4.66 trillion yuan higher versus the same period last year.
- RMB loans to the real economy rose by 12.93 trillion yuan, or 485.1 billion yuan less than last year.
- Net government bond financing reached 10.27 trillion yuan, or 4.63 trillion yuan more than last year. It comprised 99.4 percent of the increase in aggregate social financing compared with the same period last year (4.66 trillion yuan).
- Total social financing increased by 2.57 trillion yuan in August 2025, or 460 billion yuan less compared to the same period last year.
- RMB loans to the real economy rose by 620 billion yuan, or 420 billion yuan less than last year.
- Net government bond financing was 130 billion yuan, or 40 billion yuan less than last year.
Our take
On one level, Shaoxing City’s attempt to stimulate consumption through subsidizing banquets and the catering industry represents an effective retreat by the local authorities in at least one area from a frugality drive that was launched earlier in the year as part of the broader anti-corruption campaign.
At a deeper level, the Shaoxing local government’s initiative reflects the desperate plight of the catering industry following the implementation of the frugality drive, as well as the systemic crisis of deflation that China’s economy has sunk into. The policy reversal, though seemingly insignificant, highlights the contradictions and inefficacy of Beijing’s macroeconomic policies. The policy zigzag also reflects the CCP’s “fallacy of composition” problem — industries are pushed into a critical state and the economy is increasingly weakened with each successive policy adjustment, and belated corrections like the Shaoxing local government’s subsidies are inadequate to reverse structural damage.
1. The Shaoxing local government’s recent effort to boost consumption comes amid a backdrop of worsening economic conditions in China.
Official CPI and PPI data for August and the first eight months of the year underscore China’s slide into a deflationary spiral. Meanwhile, the PBoC’s monetary and credit data show household loans (negative 84.1 percent) and deposits (negative 84.5 percent), as well as corporate loans (negative 29.8 percent) and deposits (negative 14.4 percent), all sharply contracting in August.
Additionally, the fact that net government bond financing accounted for 99.4 percent of the increase in aggregate social financing in the first eight months of the year points to a near-total dependence on state intervention to push growth. These figures reflect diminished consumer confidence, with households prioritizing savings over spending, stifling economic circulation. Chinese enterprises also face mounting overcapacity issues and are discouraged by deteriorating economic conditions from investing.
Given the economic backdrop, the Shaoxing local government’s banquet subsidies and other handouts appear to be a micro-level response to a macro-level malaise. The limited scope of what the Shaoxing local government has done underscores the depth of China’s deflationary “winter.”
2. The Shaoxing local government’s catering subsidies appear to directly address the fallout from the CCP’s frugality campaign launched in May 2025. Local officials looking to be “politically correct” took Beijing’s attempt to crackdown on excessive and inappropriate banqueting and drinking by public servants to extremes, including a blanket ban on alcohol and dining out among officials in some localities.
The strict dining and drinking ban would devastate the already fragile catering industry. High-end hotels saw sharp declines in foot traffic, with five-star hotels lowering themselves to “street stall” operations. For instance, Zhengzhou’s Jianguo Hotel sold dishes originally priced at over 100 yuan for just 10 yuan starting in July, while hotels in Guangzhou and Shenzhen set up stalls outside selling signature dishes. In August, hotels in Shanghai and nationwide followed with the “five-star cooking at street prices” model.
Local governments engaging in “fallacy of composition” and erring on the side of caution magnified the impact of crippling the catering industry by tightening restrictions on wedding banquets. For example, the Luoyang local authorities limited officials’ first marriages to 20 tables (200 guests) and banned banquets for remarriages. Also, the Ganzhou local authorities launched a “zero dowry” policy in an attempt to crackdown on excessive bride prices. These policies severely impacted the wedding industry while further dampening consumer sentiment and marriage rates.
Taking the macro view, the Shaoxing local government’s banquet subsidies hint at the paralyzation of grassroots consumption, the vanishing of high-end orders, and the hospitality sector facing existential threats. The policy zigzag is unlikely to reignite demand given that prior policies have already dampened fragile consumer sentiment and economic optimism.
3. The Shaoxing case highlights the CCP’s problem with “fallacy of composition” and overcorrection.
The CCP authorities often introduce measures that seem rational in isolation, but produce catastrophic outcomes when implemented too rigidly. The recent frugality drive is one instance (anti-corruption objectives are achieved at the cost of strangling the catering sector), and the tax authority’s intensified scrutiny of overseas asset income for individuals with over $1 million in assets (resulting in accelerated capital flight and the curtailing of luxury consumption) is another.
This pattern of policy overreach followed by belated corrections is a hallmark of CCP governance. Since 2021, aggressive crackdowns have targeted tech giants (Alibaba and Tencent lost trillions in market value), education (New Oriental and TAL collapsed overnight, sparking unemployment), gaming (the restriction of gaming time for minors impacted the industry), and real estate (the “three red lines” policy introduced in 2019 triggered Evergrande and Country Garden defaults, halving property prices nationwide). Subsequent relaxations — tech policy easing in 2023, real estate “white list” financing in 2024, and now banquet subsidies — resemble desperate attempts to resuscitate an economy already in critical condition. Yet August’s metrics — a negative 40.4 percent drop in RMB loans and a negative 15.2 percent decline in social financing, with over 39 percent of aggregate social financing being state-driven — confirm that policy adjustments cannot reverse structural damage. Economic confidence is shattered, and recovery remains elusive.
4. The Shaoxing local government’s modest consumption boosting measures are a microcosm of China’s broader economic distress. The official consumer price figures for August are likely just the beginning of a protracted deflationary cycle.
Without transformative reforms — such as loosening Party control, revitalizing private enterprises, and redirecting resources toward consumption through large-scale welfare subsidies rather than prioritizing debt repayment — China’s economic downturn will persist. Shaoxing’s policy, while a cry for relief, underscores the limits of incremental fixes in the face of systemic deflationary pressures. Meanwhile, investors and policymakers are left bracing for a prolonged economic winter.
2 Analyzing the expulsion of four generals from the NPC
The 17th session of the Standing Committee of the 14th National People’s Congress concluded on the afternoon of Sept. 12 at the Great Hall of the People in Beijing.
The meeting approved a number of appointments and removals. According to an announcement released by the NPC, nine people were stripped of their qualifications as NPC deputies, including four military representatives: Zhang Lin, Gao Daguang, Wang Zhibin, and Wang Chunning.
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Zhang Lin, 60 years old, is a PLA lieutenant general. He spent the bulk of his career in the PLA Navy, holding several roles in navy logistics. Later, Zhang served in the Central Military Commission’s Joint Logistics Support Force and the People’s Armed Police. In January 2022, Zhang was promoted to head of the CMC Logistics Support Department.
Gao Daguang is a PLA Navy lieutenant general. He served in the former Shenyang Military Region for most of his career, holding various political work positions. Gao was later appointed political commissar of the CMC’s General Agency for Offices Administration by no later than July 2021, and political commissioner of the CMC Joint Logistics Support Force.
Wang Zhibin, 62, is a PLA lieutenant general. He spent many years holding various political work positions in the former Nanjing Military Region. After the Xi leadership implemented sweeping military reforms in 2016, Wang would go on to serve as political commissar of the 73rd Group Army, 81st Group Army, and Western Theater Command Ground Force. When the major corruption scandal involving the PLA Rocket Force broke out in 2023, Wang was appointed secretary of the PLARF Discipline Inspection Commission in December of that year.
Wang Chunning, 62, is a general in the People’s Armed Police. He began in the PLA’s 1st Group Army, and was promoted to commander of the 12th Group Army in 2014. In August 2016, Wang was appointed commander of the Beijing Garrison. In April 2020, he was transferred to serve as chief of staff of the armed police, and in December of the same year, he was promoted to commander of the armed police and elevated to the rank of general. Around July 2025, Wang ceased to serve as armed police commander.
Backdrop
The expulsion of the four generals from the NPC comes amid an ongoing rectification of the military:
- The exposure of the PLARF’s involvement in serious corruption in 2023 led to the purge and replacement of almost the entirety of the force’s leadership.
- Beijing announced the investigation of CMC Political Work Department director Miao Hua near the end of 2024. Shortly after, the military’s political work apparatus was subjected to rectification.
- CMC vice chairman He Weidong has not appeared publicly since March 2025. The following month, Financial Times reported that He had been removed from his post, citing several sources.
Our take
1. The expulsion of Zhang Lin, Gao Daguang, Wang Zhibin, and Wang Chunning from the NPC indicates that they are being investigated. NPC announcements are one of very few official channels through which the public can get reliable information about military affairs; the CCP authorities have sharply reduced military disclosures since the 19th Party Congress in 2017.
Beijing’s investigations into military corruption issues that surfaced around mid-2023 have already implicated several “big tigers” and are likely to implicate more senior officers. The four generals whose status as NPC deputies was revoked are only those whose downfall has been publicly confirmed, and the number of senior officers who are being scrutinized but have not officially met their downfall is likely much higher. Military corruption cases will likely keep trickling out in the public while anti-corruption authorities have not concluded investigations into Miao Hua and He Weidong.
2. The positions held by the four generals who were expelled from the NPC indicate that the ongoing military anti-corruption probe is looking into the logistics support force, the PLARF, the political work apparatus, and the PLA’s security detail in Beijing.
i) Zhang Lin held several logistics support positions and later helmed the CMC Logistics Support Department in 2022. Zhang’s downfall became almost a certainty after the logistics support apparatus and the PLARF were embroiled in the serious military corruption scandal that was exposed in mid-2023.
Currently available public information about the probe of the military logistics support apparatus includes:
- In July 2023, the CMC Equipment Development Department began soliciting evidence and information about equipment bidding irregularities dating back to October 2017.
- Global Times reported on Sept. 10, 2025 that the official “Military Procurement Network” noted that the PLARF Logistics Department’s Procurement and Asset Management Bureau made announcements banning 74 bid evaluation experts and 116 suppliers between Aug. 28 and Sept. 1.
- The “Military Procurement Network” reported that since August 2023, CMC organs and the logistics support departments of all service branches have progressively uploaded announcements penalizing experts and suppliers, with cases dating back to 2015 under the handling of Zhao Keshi, the then-inaugural head of the CMC Logistics Support Department.
ii) The expulsion of career military political work officers Gao Daguang and Wang Zhibin could be linked to the investigations into Miao Hua and He Weidong. Both Gao and Wang likely owe their career progression in the senior ranks to Miao, particularly Wang’s appointment as secretary of the PLARF Discipline Inspection Commission in 2023.
The rectification of military political work officials is somewhat akin to the situation with the political and legal affairs apparatus after the Hu Jintao leadership foiled the Bo Xilai-Zhou Yongkang coup attempt in 2012. After Bo was removed from office, Hu summoned all political and legal affairs heads to Beijing for “closed-door training” and reshuffled a number of them.
The Xi leadership is currently purging the military political officer ranks and strengthening ideological indoctrination. Recent moves include:
- On July 21, the PLA Daily reported that the Central Military Commission had issued regulations on “vigorously promoting fine traditions,” “thoroughly eliminating pernicious influences,” and “reshaping the image and authority of political work cadres.” The PLA Daily added that the regulations were part of Xi Jinping’s strategic decision to carry out “deep political rectification” within the military.
- On Aug. 29, the Politburo reviewed regulations on the CCP’s ideological and political work. The regulations called for “giving full play to the guiding role of ideological and political work” and using Xi Jinping Thought to “‘concentrate the heart and cast the soul,’ unify thinking, build consensus, strengthen confidence, and inspire morale.”
iii) Wang Chunning’s downfall could be linked to Xi Jinping’s concerns about his loyalty following the purge of Miao Hua. Miao likely oversaw Wang’s rapid rise up the ranks following the implementation of Xi’s military reforms in 2016. After serving in the PLA Ground Force for most of his career, Wang was promoted to commander of the Beijing garrison in 2016. In April 2020, Wang was transferred to the People’s Armed Police to serve as chief of staff before receiving a promotion to commander and the full general rank eight months later. While Wang appeared to be the beneficiary of Xi’s effort to replace military officers who reached high office during the Jiang Zemin faction’s era of dominance, his running into trouble now is likely because his direct political patron (Miao Hua) is being investigated.
Xi needs a PAP commander whose loyalty is absolutely not in question given the role of the armed police in defending the capital (including defending government buildings and other key sites). The PAP, and especially its Beijing corps, are the first-responders in the event of unrest or other crises that require the deployment of armed personnel, and not the Beijing Garrison. Therefore, Xi cannot afford to retain a likely compromised individual like Wang Chunning.
3. Xi Jinping is very likely directly involved in the ongoing purge of the military, especially seeing how those who are considered to be his allies and loyalists are implicated in corruption. Xi is also likely concerned that Miao Hua and He Weidong could have established new power bases in the military that could potentially undermine his control, hence the necessity of a sweeping purge.
Xi would eventually promote some senior officers to full general and have them replace the ousted. However, the lack of promotions thus far in 2025 suggests that the Xi leadership is more focused on investigations and rectification than reshuffles and renewal.
