For Ou Chengbi, a butcher at a sweltering open-air market on the outskirts of Guangzhou in southeastern China, it is hard to see signs of recovery in her country’s economy. Dripping with perspiration near unrefrigerated slabs of beef in her stall, she described how as recently as last winter she could still chop up an entire cow each day and sell it all.
“Now I can only sell half a cow a day,” she said.
Millions of Chinese businesspeople like Ou seem to be struggling, even as data suggest growth is stabilizing.
The National Bureau of Statistics in Beijing announced on Wednesday that GDP growth edged up in the second quarter to 7.5 percent compared with a year ago. However, independent surveys of businesses across China show that in sector after sector, sales and confidence are still deteriorating.
“All of them are pointing in the opposite direction from this supposed GDP number,” said Leland Miller, president of China Beige Book International, a New York data service that surveys 2,200 private businesses across China each quarter to gauge economic activity.
One of the biggest engines of Chinese economic growth in recent years — construction and other private-sector investment — is sputtering, while exports have only begun to recover from a weak winter and retail sales growth is leveling off. That leaves government investment and spending, which are running strong, propelled by redoubled lending this spring by the state-controlled banking system to the national railroad system, local governments and state-owned enterprises.
The result has been frenzied spending on the construction of new railroad lines — up 32.1 percent last month from a year earlier — and subsidized housing. Steel output in China is setting records by tonnage as a result, even as the number of housing starts in the private sector is falling steeply.
Total lending has now risen faster than economic output, even before adjusting for inflation, in every quarter since late 2011. Lending accelerated further last month, data released on Tuesday by the People’s Bank of China showed. Yet Miller’s survey and others show that private businesses are becoming less and less interested in borrowing money, because they see few opportunities to invest it profitably.
“We have not felt any improvement in our business since the beginning of the year,” said Wan Yanhong, the business manager at the Nanchang Zerowatt Electric Appliance Co in Nanchang.
“Generally speaking, comparing recent months to the same period last year, business has been very slow and very quiet,” said Kay Lam, manager of an office furniture store in Guangzhou.
Chinese officials have repeatedly called for rebalancing the economy, encouraging more spending by households, which save nearly half their incomes, and less dependence on debt-financed investment projects. However, each time growth starts to fall below the official target of roughly 7.5 percent — as it did in the first quarter, when it was 7.4 percent — the government quickly opens the spigots for further credit.
Some economists inside and outside the government contend that China has a choice: slow down the lending and accept steady declines in economic growth each year, or continue heavy lending and risk a sharp drop in economic growth someday when the financial system begins to teeter.
“Although there is no way to predict with accuracy and certainty the point at which China will reach the limits of its debt capacity, I believe that current rates of credit expansion can continue at most for another three to four years,” Michael Pettis, a finance professor at Peking University’s Guanghua School of Management, wrote in his newsletter after the release of the economic data.
Yet China’s economic outlook retains pockets of long-term strength. One of them is that tens of millions of Chinese workers have more money to spend each year. Wednesday’s data showed that average wages for migrant workers grew 10.6 percent this summer from a year ago. That was nearly five times the 2.3 percent rise in consumer prices over the past year.
Though migrants often have less than a high-school degree, they have fared better than more educated young people in China’s job market in recent years, as a quintupling in the number of college graduates has produced a glut in a country still heavily reliant on blue-collar sectors like construction and manufacturing.
Xu Hua, a graying, unshaven man, strained to carry a succession of very large white sacks of rice on Wednesday from a delivery van into a Guangzhou restaurant. However, he said the task paid better than it did a year ago. He and a co-worker each earned 50 yuan (US$8.10) for more than two hours of unloading the truck; they earned 40 yuan for the same job a year ago, Xu said.
“Who is willing to do this anymore?” he added.
Consumer retail sales are growing strongly, up 12.4 percent last month from a year earlier, according to government figures released on Wednesday, nearly matching a pace of 12.5 percent in May.
However, that has not been fast enough to offset the effects on the economy of a deceleration in private-sector investment, including a 14 percent drop in housing starts last month compared with a year earlier. Prices for new apartments have dropped in some cities and the number of transactions has slumped.
Most economists say Chinese households have the financial strength to step up spending faster than their incomes by reducing their prodigious savings rates. However, for revenue, the Chinese government relies heavily on steep value-added taxes that penalize consumption, while a faltering housing market has damaged confidence.
“There are fewer people even coming in to look,” said Deng Weiping, a wholesaler at a fabric market in Guangzhou. “And the people who do come in buy less than before.”
Additional reporting by Hilda Wang
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
If you had a vision of the future where China did not dominate the global car industry, you can kiss those dreams goodbye. That is because US President Donald Trump’s promised 25 percent tariff on auto imports takes an ax to the only bits of the emerging electric vehicle (EV) supply chain that are not already dominated by Beijing. The biggest losers when the levies take effect this week would be Japan and South Korea. They account for one-third of the cars imported into the US, and as much as two-thirds of those imported from outside North America. (Mexico and Canada, while
The military is conducting its annual Han Kuang exercises in phases. The minister of national defense recently said that this year’s scenarios would simulate defending the nation against possible actions the Chinese People’s Liberation Army (PLA) might take in an invasion of Taiwan, making the threat of a speculated Chinese invasion in 2027 a heated agenda item again. That year, also referred to as the “Davidson window,” is named after then-US Indo-Pacific Command Admiral Philip Davidson, who in 2021 warned that Chinese President Xi Jinping (習近平) had instructed the PLA to be ready to invade Taiwan by 2027. Xi in 2017
RSS