Sunday, December 6, 2015
China’s economy may be slowing, but consumers haven’t stopped spending
China’s economy may be slowing down, even though consumers haven’t stopped spending. The Chinese consumer seems oblivious to the broader state of the economy. Whereas gross domestic product growth in China has fallen from 7.9 percent two years ago to 6.9 percent in the past quarter, retail sales growth has held firm at about 11 percent. Although sales growth of big-ticket items such as cars has been relatively modest, spending on smaller items and services such as movie tickets and mobile phone subscriptions has increased at a breakneck pace. There are many explanations for the consumer’s resilience. China’s government is actively promoting policies to shift its economy toward consumption. Income per capita is rising, and the middle class is growing, driven by urbanization, which typically involves the movement of populations from rural areas to coastal cities. Some of the strength in Chinese spending can be explained by people moving back to smaller cities after trying their luck in the large tier-1 cities, such as Shanghai and Beijing, where migrant workers often discover that life isn’t easy.
http://www.businessinsider.com/chinese-still-spending-as-economy-slows-2015-12
Subscribe to:
Post Comments (Atom)
3 comments:
It is interesting you state that people are beginning to move back to smaller towns after making financial gains in the city. The question arises if low salary production line workers will continue to migrate to smaller towns. If this is the case will we see a decline in employment? The Chinese population is also, on average, very old. With child birth laws in place, China's youth population is extremely limited. We will have to find out in the next decade if there are enough youth Chinese to make up for the amount of Chinese employees leaving the labor-force.
The idea that consumer spending is rocketing despite a failing economy may be slightly skewed due to certain biases. For example, accruing to the Financial Times, official retail sales data is an unorthodox measure for consumer spending due to the fact that it includes government purchases. Also, despite the idea that consumer spending is separate from a slowing economy, it in fact is still heavily reliant on other parts of the economy. Lastly, it is strange that consumer spending would be picking up at a time of economic turmoil because of the engrained cultural value of saving that many Chinese hold.
I agree with Sofia in so far as saving has long been an important part of the Chinese lifestyle and way of life. Comparing the Chinese saving rate to that of the United States, it's not even close. That being said, it will be interesting to see whether the return of people from large cities to their smaller cities/towns will affect urbanization at all and if it will promote high growth in the areas of the smaller cities/towns.
Post a Comment