He does not know it yet, but Dang Fu has been tapped to save the Chinese economy.
A ruddy-faced millet farmer from northeast China, Dang, 56, has managed to save two-thirds of his family’s US$2,200 annual income in recent years. He grows much of his own food, wears a winter coat until it is ready for the rag heap and buys niceties only when his wife’s nagging becomes intolerable.
Last year’s indulgence, a new 25-inch TV, still makes him wince.
“It was painful to spend so much money,” he said, strolling through the aisles of a supermarket last week with his prodigal sister-in-law [she saves just half of her salary].
But such tenacious thrift, once an admirable quality here, has become a liability as the nation’s economy slows, a prospect that has stoked the government’s fear of unemployment and social instability, and that could threaten the Chinese Communist Party’s hold on power.
In recent weeks China’s once unstoppable economy has slowed sharply. Export growth, one of the main contributors to China’s expansion over the past decade, has receded and seems likely to reduce overall growth next year, the World Bank says. The stock market is in the doldrums and property values in many cities are off 30 to 40 percent.
China’s annualized growth rate, which stood at 12 percent during the Olympics, has already slid to 9 percent, an admirable number by US standards but ominously close to the 8 percent figure that Chinese economists say is required to provide jobs to the 20 million people who enter the work force every year.
On Monday, J.P. Morgan cut its fourth-quarter growth forecast for China to 7.7 percent, and other analysts predict that number could hit 5 percent by next year.
Government analysts are looking to consumers, especially the country’s hundreds of millions of high-saving peasants, to pick up much of the slack.
“If we can instill confidence in consumers and get them to spend more we can help China’s economy and help stabilize the global economy as well,” Zhu Guangyao (朱光耀), the assistant finance minister, said last week.
But getting people to spend more, especially in the face of an economic slowdown, may be a tall order.
Consumer spending makes up 35 percent of China’s GDP, and that number has been dropping since the 1980s, when it stood at 50 percent; consumer activity in the US, by contrast, is responsible for more than two-thirds of the economy.
To offset slumping exports and construction, Chinese consumers would have to increase their spending by a third, said Michael Pettis, a professor of finance at Peking University.
“I’m not sure they’re capable of doing that as quickly as the government would like,” he said.
The US$586 billion stimulus package announced by the government last month leans heavily on bridge-building and highway-paving initiatives, but it also includes a range of incentives intended to get Dang and his tightfisted brethren to unstuff their proverbial mattresses.
The measures include subsidized housing to persuade homebuyers to fill their new dwellings with furniture, and rural electrification projects that will give farmers affordable access to power.
Last week, China’s central bank slashed interest rates by more than 1 percent. On Monday, the government introduced a subsidy in 14 provinces that would make it cheaper for people to buy cellphones and washing machines.