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Shoppers in China turn wary as economy wanes

DEBT ISSUES:Young people used to flee Henan, but its capital now answers middle-class dreams, although credit card debt has replaced affluent living for some

By Stella Qiu, Chen Yawen and Philip Wen  /  Reuters, ZHENGZHOU, China

People perform a tai chi routine at a department store in Zhengzhou, China, on Jan. 19.

Photo: Reuters

Dressed in a smart black pantsuit behind the wheel of her pearl-white Audi, Zhao Na has come a long way from her roots in rural Henan Province in central China.

The 29-year-old real-estate agent cheerfully admits to having shopaholic ways and a love of Louis Vuitton and Prada handbags, typifying a wave of free-spending consumers who have had the world’s top brands scrambling for a piece of China’s US$5 trillion-plus retail market.

“When I am flush, I am happy to part with money,” said Zhao, who once splurged about 60,000 yuan (US$9,000) on a clutch of handbags during a trip to Paris in 2017. “Spending makes me happy.”

However, with China’s economy slowing, Zhao’s business has hit a wall and her income has plummeted, forcing her to shelve that source of happiness.

She has scrapped the European shopping trips and weaned herself off buying binges at her favorite mall, David Plaza, where giant digital screens flash advertisements for brands like Gucci, Lancome and Ermenegildo Zegna in the center of Zhengzhou, Henan’s capital.

“Not being able to spend money as I like makes me feel lousy, but I cannot do much about it,” Zhao said.

An economic slowdown in China, after three decades of unbridled growth, is being felt especially keenly by consumers like Zhao in Henan. The province, with its 100 million people, is a key pillar of China’s aspirations to transform its economy by boosting domestic spending and raising living standards in the country’s interior.

However, according to dozens of interviews with consumers and merchants across Henan, as well as trade group data, people in the province are spending less on everything from cars and household appliances to clothing and cosmetics.

Scaled-back consumption by inland urbanites like Zhao could have serious repercussions for China’s economic growth, already imperiled by an escalating trade dispute with the US.

It could also be a reality check for global retailers.

Italian suitmaker Ermenegildo Zegna, US luxury jeweler Tiffany and Apple have all warned that consumers across China are paring back spending.

On Wednesday, China reported weak growth in retail sales and a drop in spending on clothing for the first time in a decade.

Slowing spending in inland cities such as Zhengzhou could dent the ambitions of global retailers that have pinned their hopes on future growth in regions like Henan, the largest provincial economy beyond China’s prosperous coastal regions.

Long a dusty provincial capital, Zhengzhou’s transformation in recent years into a metropolis with a glittering skyline and fashionable malls has been staggering.

The city of 10 million is a key transportation hub on China’s Belt and Road network, linked by rail to Central Asia and Europe beyond, with high-speed connections to Beijing and Shanghai.

Taiwanese contract manufacturer Hon Hai Precision Industry Co, known as Foxconn overseas, has built an enormous iPhone factory in the city, which employs 230,000 people.

Ambitious young people once typically fled Henan to seek better lives elsewhere, but Zhengzhou now gives them a place to pursue their middle-class dreams: earning more, and being able to afford their own modern homes and an array of consumer goods.

For Zhao, the city was a beacon of hope.

Born into a family of farmers in rural Henan, the youngest of three children, Zhao dreamed from an early age of escaping her impoverished village. She did well in school, which allowed her to attend university in Zhengzhou, where she discovered a talent for sales.

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