Factories are buzzing, new apartments are being snapped up and more jobs are available. When China released its new economic data on Friday, they showed a remarkable post-pandemic increase.
The question is whether small businesses and Chinese consumers can fully participate in good times.
China reported Friday that its economy grew a staggering 18.3 percent in the first three months of the year compared to the same period last year. While the number is steep, it also reflects the past – the country’s production fell 6.8 percent year over year in the first quarter of 2020 – like an indication of how China is doing now.
A year ago, entire cities were shut down, planes grounded, and highways blocked to control the spread of a relentless virus. Today, global demand for computer screens and video consoles in China is increasing as people work from home and a pandemic recovers. That demand has continued as Americans conduct stimulus checks to try to spend money on patio furniture, electronics, and other goods made in Chinese factories.
China’s recovery was also fueled by large infrastructure. Cranes dominate the city’s skyline. Construction projects for highways and railways have created short-term jobs. Property sales have also helped boost economic activity.
But exports and real estate investments can only carry China’s growth so far. Now China is trying to get its consumers to return to their pre-pandemic routes, something other countries will soon struggle with with newly available vaccines.
Demand for Chinese exports is likely to weaken over the course of the year. Policymakers have tried to contain overheating in the property market and the corporate sector, where some companies have borrowed beyond their means. Many economists are looking for signs of a broader recovery, relying less on exports and government and more on Chinese consumers to fuel juice growth.
A slow rollout of vaccinations and fresh reminders of bans have unsettled many consumers in the country. The restaurants are still struggling to recover. Waiters, shopkeepers and students are not yet ready for the “revenge spending” that economists hope will fuel growth. When virus outbreaks happen, Chinese authorities quickly put in place new bans that harm small businesses and their customers.
To avoid a wave of outbreaks in February, authorities have canceled millions of migrant workers’ travel plans for the New Year holiday, the biggest public holiday in China.
“China’s Covid strategy has been to destroy it when it comes back, but there seems to be a lot of voluntary social distancing and that is affecting services,” said Shaun Roache, chief economist for Asia Pacific at S&P Global. “It is holding back normalization.”
Wu Zhen runs a family business with 13 restaurants and dozen of banquet halls in Yingtan, a city in southeast China’s Jiangxi Province. When China got back on its feet last year, more people went to their restaurants to enjoy their favorite dishes like braised pork. But just as she and her staff were preparing for the Lunar New Year, a new outbreak of Covid-19 caused authorities to limit the number of people allowed to gather in one place to 50.
“It should have been the best time of year for our business,” said Ms. Wu, 33.
That year, Ms. Wu decided that it would be cheaper to close the entire store while on vacation. “If we want to serve New Year’s Eve dinner, the wages for a day are three times higher than the usual time. We’re saving more money by just closing the doors and the shop, ”she said. It is the second year in a row that restaurants have closed their doors during the holidays.
April 15, 2021, 9:08 p.m. ET
Ms. Wu inherited the business from her father two years ago and employs more than 800 people. Before the pandemic, three quarters of business revenue came from large banquets for weddings and family reunions. She said business has not returned to normal after months of the virus restrictions being lifted.
The setbacks that small business owners like Ms. Wu face also affect regular consumers who are nervous about opening their wallets. Zhaopin, China’s largest job-recruiting platform, says there are more vacancies in hotels and restaurants, entertainment services and real estate than there was a year ago. But households are still cautious about spending.
Families continue to save faster than they did before the pandemic, worrying economists like Louis Kuijs, head of Asian economics at Oxford Economics. Mr Kuijs sees household savings as an indication of whether Chinese consumers are ready to start splurging after months of being stuck at home.
“More people still don’t seem to be going all the way in terms of carefree spending,” he said. “Sometimes there are still some concerns about Covid, but maybe there are also concerns about the general economic situation.”
Many families have taken on more debt over the past year to buy real estate and cover expenses during the pandemic. China is still largely lacking the social safety net that many affluent countries offer, and some families have to invest in savings for health care and other large expenses.
Unlike most developed countries, China does not subsidize its consumers. Rather than handing out checks last year to stimulate the economy, China ordered state banks to lend to businesses and offered tax breaks.
Travel restrictions during the Chinese New Year holidays dampened consumer appetites and slowed the momentum of Chinese shoppers. However, Friday retail data showed that March sales were better than expected, raising hopes that consumers like Li Jinqiu, 25, could feel more confident in the months ahead.
At the moment, Mr. Li, who is recently married and has a baby at home, still chooses to save rather than spend. He had planned to work for the family business but it has been hit by the pandemic and he doesn’t think there will be many options for him if he stays.
“The whole family has a sense of crisis,” said Mr. Li. “Because of the pandemic and the family business, I feel a sense of crisis.”
Mr. Li said he received a sales job with a financial firm in Beijing, but postponed the start date to care for his newborn. He said he borrowed once to spend on items like his $ 150,000 Mercedes. Now he drives a $ 46,000 electric car and has postponed buying new clothes.
“When I spend,” he said, “I’m more careful.”