I don’t know if you read about the demonstrations in Beijing by former army soldiers over the last few days. This is in response to China’s plan to cut the strength of the PLA by 300,000 troops in order to pay for Naval and Air modernization programs. So even with all the profits they are making trading with the US... it isn’t enough.
Mixed bag actually.
If you want to be a credible global power, you need to be able to project your forces in strength to any point in the world. Hence the need to modernize and expand the air force and the navy. Paying for a bunch of PLA divisions that are essentially stuck in China (because you cannot readily move them) and are no longer needed for homeland defense (because the Russians are not coming and the Americans never were - at least on the ground) is a poor use of defense dol...er, yuan.
If you maintain that unneeded ground force structure, you are obliged to have a plan and to allocate funds to modernize it at some point. If you don’t modernize it, it impacts troop morale, quality of their leadership and training suffers, you still have to maintain their old, obsolete equipment and facilities, and, to your point, you still have to pay them. A RIF solves all those problems.
You are right though, the government funding barrel isn’t bottomless even in China and what there is has not been all that well managed. Hence all those modern Chinese cities in places where no Chinese wants to live in (or can find a job in after construction is finished).
https://www.youtube.com/results?search_query=chinese+ghost+cities