When the government abruptly ended tough coronavirus measures in December, many Chinese were hoping for a strong recovery from pent-up demand. Eight months later, China is instead facing an accumulation of bad news, including record youth unemployment, a deep housing slump, stagnant spending and even deflation.
For many Chinese, accustomed to an ever-expanding economy and accompanying rising living standards, this comes as a shock. They are now battling a slowdown in business and shrinking personal fortunes.
After speaking with a dozen business owners and consumers, as I have for many years, I can report: Their confidence in the economy and the future of the country is at its lowest point. If they were hoping for a rebound, that hope is gone. They worry that this is the beginning of something they don’t dare imagine, and that the government has no solution. The bad news continues.
“The scariest thing is that everyone around you is at a loss as to what to do next,” said Richard Lee, an auto parts wholesaler. “I believed that this country would get better and better.”
In the first half of 2023, Lee’s business revenue fell 15% year-on-year as his city (with more than 10 million other residents) was put on lockdown for several weeks.
He realized that other companies were struggling as well. Some of his customer auto repair shops have closed as car owners cut back on spending.
Li had four stores, but two of them were closed. He laid off two-thirds of his employees and stopped investing in new products. He also cut back on his eating out and socializing with friends. Cash-strapped, he tried to sell the apartment he bought for investment in 2020. But even after dropping his price from $500,000 to $400,000, inquiries were few and far between.
It’s getting harder for people like Mr. Li to rely on the Chinese government to know what’s going on in the economy. The data the company has been making public for years has been suppressed. Last week, it stopped releasing its youth unemployment rate after data peaked at 21.3% in June.
But the set of official data the government was about to release for July was dire enough.
Consumer prices in China fell last month for the first time in more than two years.Chinese bank extended $47.5 billion The volume of new loans denominated in the renminbi fell 89% from June and halved from the same period last year.video-based housing sales fell After shrinking by nearly a quarter last year, it has fallen to 6.5% in the first seven months of the year. The decline is alarming in a country where three-fifths of household wealth is in real estate.
Anxiety is so high that people are taking to the social media site Xiaohongshu to post amulets that they believe will help them sell their homes.
China plunged into deflation last year after the government’s draconian “zero-corona” policy severely curbed consumption and business activity.Xu Chenggang, An economist at Stanford University has explained why deflation is harmful.
“The best-case scenario is that everyone expects prices to continue to fall, so we keep waiting for prices to fall further,” he said. “The worst case scenario is people are very scared and very anxious.” Worry about the survival of jobs and businesses will push the economy into a more deflationary trap, with more savings and less spending, he said. Stated.
People are already saving more and spending less because of growing anxiety.
Kov Liu, founder of an education startup in a big city in southwestern China, said revenues have been flat this year, terrible for a company that used to grow 40% a year. Liu, who is in his mid-30s, has about $1.5 million in cash, but is determined to keep his monthly expenses to around $800, half of which goes to rent.
He plans to keep his five-year-old Toyota Corolla and won’t be buying property anytime soon. He purchased two apartment complexes in 2019, but both developers ran out of money and stopped construction. This is the nightmare that hundreds of thousands, if not millions, of Chinese have experienced since the housing boom abruptly ended.
Liu believes China’s economic decline could drag on for years. He has sold all of his positions in mainland Chinese stocks this year and said he would never touch Chinese stocks, even if they were trading in New York or Hong Kong.
Boris Dai, 44, is a commercial real estate consultant in Beijing who earned less than $15,000 in the first six months of the year. That’s half what he earned during the pandemic and less than 15% of his previous earnings. He was renting office space, another source of his income, but it evaporated when the tenant went out of business six months ago.
“I can only lie down,” Dai said, using the term to describe a break from a grueling job. “I have no expectations for the future.” He converted his sport utility vehicle into a sleeper so he could save on hotel bills when traveling with his wife.
Even successful entrepreneurs are reluctant to take out loans due to the uncertain future.
Mark Fu, founder of a financial advisory firm with offices in Chengdu and Hong Kong, said business was strong this year. He explained that many wealthy Chinese have realized that money cannot buy security and dignity during the pandemic and are seeking his help to move their financial assets out of China. A bank offered him a business loan at a low interest rate, but he is reluctant to borrow money. Instead of expanding, the workforce was cut from his 12 to his 10 due to cutbacks.
He said he was horrified by the government’s string of industry strangleholds during the pandemic. He said he believed that if he worked hard, he would succeed. Now he’s concerned that how he runs his business isn’t the most important thing.
“Is the government going to exterminate you all at once?” he asked, “Or do you want me to make you money?”
The atmosphere on social media has become very dark, Commentary The Securities Daily, the official publication, called for restraint on posts speculating about future problems. The article, citing headlines such as “China’s Lehman Brothers is Coming!”, said rumors had caused market volatility. “Brokerage firm holds conference call for ‘darkest hour”’
People are desperate because they cannot imagine how China can get out of its downward spiral. They believe the root of the problem lies in the ideology of China’s supreme leader, Xi Jinping. Xi Jinping seems to hate the private sector and has dismantled the elements of the market economy that have made China so successful.
Thirty-five-year-old Andy Wang quit his bank earlier this year to prepare for his postgraduate studies in Australia. He was put off last fall when the candidates for the new party leadership, all protégés of Mr. Xi, were announced. “Then the country lost its remedial capacity,” he said.
His parents are wealthy, but he is pessimistic that he will never have the same opportunities they once enjoyed. “I don’t see any way to make money in this country,” he said. “I don’t even know if I can maintain my current standard of living. All I could do was try to survive.”