Opinion | China needs to reincentivize consumption

By Tom Fowdy

A phrase I've always used is that western media coverage of China's economy is always negative, whereas that of America's economy, is always positive. To cite just one example of this, a recent Bloomberg articles leads with: "China Economic Rebound Falters, Weighed by Debt, Property Slump, Little Stimulus" where as in contrast, an article from NPR reads: "Despite inflation and rising interest rates, the U.S. economy is still strong." One might assume, looking at this choice of headlines, that US GDP growth will be higher than China's this year, and its Beijing, not Washington, which has been teetering on the edge of recession.

In doing so, the western media enjoying using this express negative terminology, such as "faltering", "slumps", "fading", "fizzling", "lost decade like Japan" etc and over the past few months, it's been wholesale. A lot of it is ideologically and politically motivated, because there is a vested interest in not wanting China to succeed, and of course break the confidence and interest of western investors in the country. Some outlets, such as the Financial Times, have become notorious for this deliberate and maliciously charged negativity, but it is ultimately across the board. Even the BBC, responding to China's new law on "foreign relations" was quoting experts saying that you might not want to invest in China anymore.

Despite these political motivations, however, I am personally inclined to believe China's economy is not doing as well as it should be, or was forecasted to. Sure, it isn't in a disaster scenario as some outlets like to sensationally and opportunistically claim. However, I can see from my own China experience that there are many underlying problems, in particular the country being still in the early stages of recovery from the "zero covid" era, with consumer confidence having not yet fully resuscitated. My visit to Beijing in early May was an eye opener to this regard, showing that there is a long way to go and China's government ought to take more meaningful intervention.

The era of zero-covid controls has severely damaged China's consumption by making people feel "risk adverse" which has had a run-on effect on youth unemployment. When the country opened up again and people began travelling, I noted many stories began circulating about young people who while travelling the country, were doing so on micro-budgets. This included sleeping on trains, in bathrooms or even McDonalds. Unusually, this was even covered in the Global Times, but the underlying key to this behaviour is that young people do not have money to spend, or are unwilling to do so for a variety of reasons.

Travelling to Beijing, I observed that many shops in the famous shopping area of Wangfujing had closed down, with empty retail units abound. The area was not as busy as it usually was, and the similar high brand malls surrounding it, were also unusually quiet for a weekend (although it has to be taken into account there had been a public holiday). Similarly, Peking international airport's terminal was completely empty. Every retail unit apart from the odd duty free was also closed and shut down. There was nowhere to eat but a single KFC, and of course foreign travellers were not there in any meaningful number, and it appears that even at the time of writing, foreign confidence in travelling to China has not truly rekindled.

When all this is added up, how many jobs in the country have been lost due to these economic conditions? I of course was praiseworthy of China's zero covid strategy for a long time, especially as it averted the disastrous and deadly conditions in the west. However, I did come to the recognition that by 2022, it had become unreasonable and arbitrary, and the Shanghai lockdown was one of the most jaw dropping things I'd ever seen. Even though this is now all over, there are economic scars lasting from it which have undermined social confidence, and it is going to take time to make consumption habits finally rekindle themselves.

China needs to take more drastic action to rekindle public confidence in consumption, which combined with a turbulent global economic climate (including recession in the Eurozone, New Zealand and Taiwan) is hurting its own manufacturing output. However, maturity is recognising that some of China's own policies have contributed to this situation. The expectation of the media was that the economy of the country would roar back, but rather it's had a small uptick and then started to struggle. The summer months should be a time of much more intense public consumption, as people travel, enjoy themselves and relax. Thus if China cannot improve itself throughout this period, then we might be inclined to believe there are real problems at hand.

The author is a well-seasoned writer and analyst with a large portfolio related to China topics, especially in the field of politics, international relations and more. He graduated with an Msc. in Chinese Studies from Oxford University in 2018.

The views do not necessarily reflect those of DotDotNews.

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