China’s economy struggles as consumers tighten belts
With home sales crashing, real estate agent Zhang Yonggang is tightening his belt, part of a plunge in Chinese consumer demand that is a bigger threat to economic growth than Beijing’s tariff war with Washington.To get more Shanghai economy news, you can visit shine news official website.
Zhang, who works in the central city of Taiyuan, said his office sold no apartments last month after Beijing tightened lending controls in July to rein in housing costs and debt. Zhang, 42 and married with a teenage son, said his income has fallen by half from a year ago.“I have no money to buy a home and no plans to change cars,” Zhang said. “It is definitely the toughest time I’ve ever seen.” Communist leaders are counting on consumers to power China’s economy, replacing trade and investment. But shoppers, spooked by the tariff war and possible job losses, are cutting spending on cars, real estate and other big-ticket purchases. Economic growth sank to a three-decade low of 6% over a year earlier in the quarter ending in September.
That is stronger than most major countries but a strain for Chinese companies that need to repay debt. Factory activity shrank more than expected in October, according to an official trade group, the China Federation of Logistics & Purchasing. Analysts said that suggested an uptick a month earlier didn’t mark the start of a recovery.The Chinese slowdown has sent shockwaves through the global economy. Companies from Apple to Tiffany’s have reported weaker sales as Chinese consumers and tourists spend less. China’s demand for iron ore, copper and other commodities has softened, depressing global prices.Communist leaders express confidence China can survive President Donald Trump’s tariff hikes on its exports. On Thursday, the ruling party’s Central Committee affirmed support for private business within an economy dominated by state industry and gave no sign of plans to change economic strategy.
But leaders openly fret over slumping consumer spending and other domestic activity.Premier Li Keqiang, the top economic official, told local leaders last week to fight “downward pressure” on the economy and “make sure targets for this year are achieved.”“Many real economic entities are struggling amid weak domestic demand,” the premier said at a meeting with provincial governors, according to a Cabinet statement. Beijing has tried to stick to plans to nurture self-sustaining, consumer-driven growth instead of resorting to stimulus, which usually means splurging on construction paid for with bank loans. That might re-ignite a surge in debt that forecasters estimate has risen as high as the equivalent of 300% of China’s annual economic output.Trump’s punitive duties on billions of dollars of Chinese goods in a fight over Beijing’s trade surplus and technology ambitions have battered exporters.
But their impact on the rest of the economy has been smaller than some forecasters expected. And trade overall is stronger than expected. Shipments to the United States fell nearly 11% in the first nine months of 2019, but exports to the whole world were off only 0.1%.Retail sales rose 8.2% over a year earlier in the nine months ending in September. But some industries suffered painful contractions: Auto sales fell 11.7%.
The pressures are reflected in Anna Li’s dilemma. The 28-year-old employee of an information technology company in Beijing plans to buy an apartment, but first she wants a new job. She has looked since last year and found nothing because companies have cut hiring. “I used to have a plan to buy an apartment next year, but now it depends on the success of my job hunting,” said Li.The International Monetary Fund is forecasting annual growth of 6.1% this year, down from last year’s 6.6% and just above the official minimum target of 6%. Next year, the IMF expects a further decline to 5.8%. Some analysts question whether China really is achieving even that growth and say the real rate may be closer to 3%. They blame flaws in data collection and political pressure to make results look better.