China’s factories coming back
by weeks of idleness and home confinement, a time when many had to depend on their savings to eat. For a generation of young Chinese people known for their American-style shopping sprees, saving and thrift hold a sudden new appeal.
Chloe Cao, a Beijing translator of French stage dramas, once spent more than $200 a month in restaurants, $70 a month in coffee shops and as much as $170 for a tube of imported face cream. Now unemployed, she cooks for herself, brews her own coffee and buys $28 Chinese face cream.
“My spending power has suffered a clifflike drop,” Cao said. “When I find a job, I will start saving money, and I can’t live a wasteful life like before.”
China’s consumer confidence problem offers potential lessons for the United States and Europe, which are only beginning to plan their recoveries. Even if companies reopen, the real challenge may lie in enabling or persuading stricken and traumatized consumers to start spending money again.
By some measures, China’s economy is getting back on track. By the end of February, most of its factories and mines had reopened, according to a variety of data, cranking out everything from steel to cellphones at a blistering pace through March. Industrial output rebounded to a near-record level.
Other measures suggest the Chinese economy is still limping. Retail sales, which stayed strong during past crises, plummeted almost one-sixth in March from a year earlier.
Even the factory work that has resumed may not be dependable for long. Customers in the United States and Europe also are not buying Chinese-made goods like they once did. U.S. department stores, for example, have been canceling and postponing orders.
Overall sales of furniture, clothing, household appliances and jewelry each plunged by a quarter to a third in March compared to a year earlier. On the street and in malls, stores have actual buyers.
China needs to kick-start consumption because the old ways to juice its economy don’t work like they once did. After running up huge debts to pay for new high-speed rail lines, highways and other infrastructure following the global financial crisis, China tried to depend more on its consumers.
The risk for China is that its consumers grow too cautious in their spending. The country has spent years enlarging its social safety net to extend health care and other services to more people so that they will spend their money instead of saving it for an emergency.