China’s economy booming; shoppers remain skittish

Factories are whirring, new apartments are being snapped up, and more jobs are up for grabs. When China released its new economic figures Friday, they showed a remarkable postpandemic surge.

The question is whether small businesses and Chinese consumers can fully share in the good times.

China is expected to report that its economy grew by a jaw-dropping double-digit figure in the first three months of the year compared with the same period the year before. The number is widely estimated by economists to be 18% to 19%. But the growth is as much a reflection of the past — the country’s output shrank 6.8% in the first quarter of 2020 compared with a year earlier — as it is an indication of how China is doing now.

A year ago, entire cities were shut down, planes were grounded and highways were blocked to control the spread of a relentless coronavirus. Today, global demand for computer screens and video consoles that China makes is soaring as people work from home and as a pandemic recovery beckons. That demand has continued as Americans with stimulus checks look to spend money on patio furniture, electronics and other goods made in Chinese factories.

China’s recovery also has been powered by big infrastructure. Cranes litter city skylines. Construction projects for highways and railroads have provided shortterm jobs. Property sales also have helped strengthen economic activity.

But exports and property investment can carry China’s growth only so far. Now China is trying to get its consumers to return to their prepandemic ways, something other countries will soon have to grapple with as more vaccines become available.

Demand for Chinese exports is expected to weaken later in the year. Policymakers have moved to tamp down overheating in the property market and in the corporate sector, where many firms have borrowed beyond their means. Many economists are looking for signs of a broader recovery that relies less on exports and the government and more on Chinese consumers to juice growth.

A slow vaccination rollout and fresh memories of lockdowns have left many consumers in the country skittish. Restaurants are still struggling to bounce back. Waiters, shopkeepers and students are not ready yet for the “revenge spending” that economists hope will power growth. When virus outbreaks occur, Chinese authorities are quick to put new lockdowns in place, hurting small businesses and their customers.

To avoid a wave of outbreaks in February, authorities canceled the travel plans of millions of migrant workers for the Lunar New Year holiday, the biggest holiday of the year in China.

“China’s COVID strategy has been to crush it when it reappears, but there seems to be a lot of voluntary social distancing, and that’s affecting services,” said Shaun Roache, chief economist for Asia Pacific at S&P Global. “It’s holding back normalization.”

Wu Zhen runs a family business of 13 restaurants and dozens of banquet halls in Yingtan, a city in China’s southeastern Jiangxi province. When China began to bounce back last year, more people started coming to her restaurants for their favorite dishes, like braised pork. But just as she and her employees began preparing for the Lunar New Year, a new COVID-19 outbreak prompted authorities to limit the number of people allowed to gather in one place to 50.

“It should have been the best time of the year for our business,” said Wu, 33.

This year, Wu decided that closing the entire business over the holiday would be cheaper.

“If we want to serve Lunar New Year’s Eve dinner, the labor wage for one day is three times higher than the usual time. We save more money by just closing the doors and the business,” she said.

It will be the second year in a row that the restaurants shut their doors over the holiday.

Wu inherited the business from her father two years ago and employs more than 800 people. Before the pandemic, three-quarters of the business revenue came from big banquets for weddings and family reunions. She said business has yet to return to normal after months of crushing virus restrictions.

The setbacks facing small-business owners like Wu are also affecting regular consumers who are jittery about opening their wallets. According to Zhaopin, China’s biggest job recruitment platform, more jobs in hotels and restaurants, entertainment services and real estate are available than a year ago. But households are still being cautious about spending.

Families continue to save at a higher rate than they did before the pandemic, something that worries economists like Louis Kuijs, who is head of Asian economics at Oxford Economics.