China’s slow economy, seen from ground level
THE was disgusted, a shirtless man kneeling this week outside the headquarters of Country Garden, a troubled Chinese property giant, might easily have gone unnoticed – if, that is, guards hadn’t tried to cover him up behind a wall of large red screens. Still more security guards held up screens to hide a woman and a teenage girl, sitting on the ground next to the family’s luggage. Others blew whistles at anyone taking pictures.
Across the road, Chaguan, who happened upon this silent human drama by chance, accompanied by three riot police in combat boots, looked at the foreign reporter, then left. When asked later why this family had come to Country Garden’s headquarters in the southern city of Foshan – and what happened after the three were led to a police station – staff at company explains, unfortunately, that colleagues who could answer are on annual leave.
As it happens, small, non-political protests are common in China, as citizens try to shame companies or government arms into addressing their grievances. Demonstrations become more frequent in times of economic crisis. In recent months, as China’s property sector has again plunged into crisis, many have been including homeowners who paid in advance for apartments that did not was still completed. In faraway Beijing, the ruling Communist Party Politburo has ordered developers and officials to ensure that the promised houses are delivered. At the same time, in cities and regional towns, protesters are constantly at risk of police warnings or arrest.
As China’s economy slows, all sorts of moves to hide bad news are becoming apparent. The statistics bureau stopped publishing its consumer confidence index after numbers in April fell to levels last seen at the height of the pandemic. With youth unemployment climbing shamelessly, the same bureau stopped reporting that statistic this week, saying it is reviewing how to count unemployed youth. Analysts are under pressure to be positive. Unfortunately, as with those clumsy, shadowy guards, such cover-up only draws attention to China’s woes.
A number of grim statistics have been published in recent weeks. These reflect a sharp fall in new bank lending (despite lower interest rates), disappointing retail sales and fewer property transactions. Adding to the domestic gloom, exports are also down. The common link is a fall in demand, both at home and abroad.
Foshan, a commercial center of 9.5m people next to the southern megapolis of Guangzhou, is a good place to see a property-based slowdown on the ground. In addition to hosting Country Garden’s headquarters, Foshan is China’s furniture retail capital. Among the outlets is the Louvre, a glitzy mall where tenants sell leather massage chairs or ornate desks for 30,000 yuan ($4,110) each. Sellers talk about boom times, five or ten years ago, when Chinese families invested savings in several properties, and all of them had to be given away. The best buyers from the wealthiest cities, such as Beijing or Shanghai, still have money to spend. But the pandemic hit hard, especially in overcrowded middle- to lower-class cities. Customers without money “don’t want to go into the Louvre,” says a woman selling hardwood tables for tea ceremonies. In the past customers bought “on impulse”. Now they compare prices on the Internet first.
Starting in the summer of 2020, after China beat back its first pandemic wave, the economy seemed to be protected by strict zero-covid controls, recalls a saleswoman furniture with a retro feel from the 1950s. But as the pandemic dragged on, she watched customers cancel orders and rethink home improvement plans as their own businesses suffered. Now, a post-pandemic warning “forces people to spend conservatively”.
Over strong black tea, the co-owner of a small delivery company recalls how “vibrant” customers were in March and April, after covid controls were lifted. What he does say is that the spending “craze” is over, however, and people now have to work and earn more. Delivery rates to Zhengzhou, the capital, have fallen to 1.5 yuan per kg, down from 1.8 yuan before the pandemic, he sighs.
Domestic tourism increased after the pandemic, says a worker in a warehouse full of cheap furniture for hotels. “Everywhere is full of people, anyway.” But people don’t spend as they once did, she says. “A lot of people don’t have that much money on hand. “
Foreigners are still a strange sight in most of China. Furniture buyers from India, Africa and Arab countries have started to return to Foshan, but they are not seen as big liberators. They want bargains, says a woman who sells marble-topped tables. Indians want designs that were favored by the Chinese people in the 1990s, she confides, a little faded. Out of her subsequent listening sessions, an Indian trader assures Chaguan that customers in India like modern, minimalist furniture, “not this Chinese style”.
An unsuitable party to resolve this issue
It is easy for foreigners to underestimate the housing wealth of many urban Chinese. A seller speaks with relief of buying a flat in Foshan ten years ago when it was “cheap”. She’s not wrong: local prices have almost doubled since 2013. In the 1990s tens of millions of urban Chinese bought subsidized apartments from state employers for less than the cost of a fancy table now at the Louvre mall. Some are worth 50 times more today.
That same sense of security is out of reach for those who haven’t bought yet. A migrant from Jiangxi, a poor inland region, considered buying a flat in Foshan last year. The local government has reduced the minimum mortgage deposit for first-time buyers to 20%, reducing one barrier to ownership. But she is not buying now: her income is not stable and she is saving for accidents or health emergencies. In her early 30s, she never knew life was so uncertain.
Foshan represents a China that has sunk into gloom. That is a puzzle for a party in control. Bad news can be censored and the unhappiness hidden from view. Policies can be applied. But no ruler can order people to feel confident and spend. ■
Read more from Chaguan, our China columnist:
Why Chinese women are being denied legal land rights (August 10)
Xi Jinping’s revealing response to floods and heatwaves (August 4)
In Xi Jinping’s China, moderate planners rule (July 27)
Also: How the Chaguan column got its name