Factories are whirring, new apartments are being snapped up,
and more jobs are up for grabs. When China released its new economic figures
Friday, they showed a remarkable post-pandemic surge.
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The question is whether small businesses and Chinese
consumers can fully share in the good times.
China reported on Friday that its economy grew by a
jaw-dropping 18.3 percent in the first three months of the year compared with
the same period last year. While the figure is steep, it is as much a
reflection of the past — the country’s output shrank 6.8 percent in the first
quarter of 2020 from a year earlier — as it is an indication of how China is
doing now.
A year ago, entire cities were shut down, planes were
grounded, and highways were blocked to control the spread of a relentless
virus. Today, global demand for computer screens and video consoles that China
makes is soaring as people work from home and as a pandemic recovery beckons.
That demand has continued as Americans with stimulus checks look to spend money
on patio furniture, electronics and other goods made in Chinese factories.
China’s recovery has also been powered by big
infrastructure. Cranes dot city skylines. Construction projects for highways
and railroads have provided short-term jobs. Property sales have also helped
strengthen economic activity.
But exports and property investment can carry China’s growth
only so far. Now China is trying to get its consumers to return to their
pre-pandemic ways, something other countries will soon have to grapple with
once more vaccines become available.
Demand for Chinese exports is expected to weaken later in
the year. Policymakers have moved to tamp down overheating in the property
market and in the corporate sector, where some firms have borrowed beyond their
means. Many economists are looking for signs of a broader recovery that relies
less on exports and the government and more on Chinese consumers to juice
growth.
A slow vaccination rollout and fresh memories of lockdowns
have left many consumers in the country skittish. Restaurants are still
struggling to bounce back. Waiters, shopkeepers and students are not ready yet
for the “revenge spending” that economists hope will power growth. When virus
outbreaks occur, Chinese authorities are quick to put new lockdowns in place,
hurting small businesses and their customers.
To avoid a wave of outbreaks in February, authorities canceled
the travel plans of millions of migrant workers for the Lunar New Year holiday,
the biggest holiday in China.
“China’s COVID strategy has been to crush it when it
reappears, but there seems to be a lot of voluntary social distancing, and
that’s affecting services,” said Shaun Roache, chief economist for Asia Pacific
at S&P Global. “It’s holding back normalization.”
Wu Zhen runs a family business of 13 restaurants and dozens
of banquet halls in Yingtan, a city in China’s southeastern Jiangxi province.
When China began to bounce back last year, more people started going to her
restaurants for their favorite dishes, like braised pork. But just as she and
her employees began preparing for the Lunar New Year, a new COVID-19 outbreak
prompted authorities to limit the number of people allowed to gather in one
place to 50.
“It should have been the best time of the year for our
business,” said Wu, 33.
This year, Wu decided that closing the entire business over
the holiday would be cheaper. “If we want to serve Lunar New Year’s Eve dinner,
the labor wage for one day is three times higher than the usual time. We save
more money by just closing the doors and the business,” she said. It will be
the second year in a row that the restaurants shut their doors over the
holiday.
Wu inherited the business from her father two years ago and
employs more than 800 people. Before the pandemic, three-quarters of the
business revenue came from big banquets for weddings and family reunions. She
said business had yet to return to normal after months of crushing virus
restrictions.
The setbacks facing small-business owners like Wu are also
affecting regular consumers who are jittery about opening their wallets.
According to Zhaopin, China’s biggest job recruitment platform, more jobs in
hotels and restaurants, entertainment services and real estate are available
than a year ago. But households are still being cautious about spending.
Families continue to save at a higher rate than they did
before the pandemic, something that worries economists like Louis Kuijs, who is
head of Asian economics at Oxford Economics. Kuijs is looking at household
savings as an indication of whether Chinese consumers are ready to start
splurging after months of being stuck at home.
“More people still seem to not go all the way in terms of
carefree spending,” he said. “At times there are still some lingering COVID
concerns, but there is perhaps also a concern about the general economic
situation.”
Many families took on more debt last year to buy property
and to cover expenses during the pandemic. China still largely lacks the kind
of social safety net that many wealthy countries provide, and some families
have to dip into savings for health care and other big costs.
Unlike much of the developed world, China does not subsidize
its consumers. Instead of handing out checks to jump-start the economy last
year, China ordered state-owned banks to lend to businesses and offered tax
rebates.
Data from the first two months of the year already show that
consumers like Li Jinqiu are spending less and saving more.
Li, 25, who recently got married, has a 1-month-old baby at
home. He had planned to work for the family business, but it has been hit by
the pandemic, and he does not think there is much opportunity for him if he
stays.
“The whole family has some sense of crisis,” Li said.
“Because of the pandemic and because of family business, I have a sense of
crisis.”
Li said he had received a job offer in sales at a financial
firm in Beijing but had delayed the start date to help take care of his
newborn. He said he had once borrowed to spend on items like his $150,000
Mercedes. Now he drives a $46,000 electric car and has put off buying clothes.
“When I spend,” he said, “I am more cautious.”
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