The world’s traditional growth engine reported an 18.3 percent leap in the first quarter. But consumers and small businesses aren’t fully sharing in the spoils.
April 15, 2021
Factories are whirring, new apartments are being snapped up, and more jobs are up for grabs. When China released its new economic figures on Friday, they showed a remarkable postpandemic surge.
The question is whether small businesses and Chinese consumers can fully share in the good times.
China reported on Friday that its economy grew by a jaw-dropping 18.3 percent in the first three months of the year compared with the same period last year. While the figure is steep, it is as much a reflection of the past — the country’s output shrank 6.8 percent in the first quarter of 2020 from 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 virus. 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 has also been powered by big infrastructure. Cranes dot city skylines. Construction projects for highways and railroads have provided short-term jobs. Property sales have also helped strengthen economic activity.
Image The port container terminal in Lianyungang, a city in China’s Jiangsu Province. Global demand for Chinese goods is soaring.Credit…Hector Retamal/Agence France-Presse — Getty Images
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 that other countries will soon have to grapple with once 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 some 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, the Chinese authorities are quick to put new lockdowns in place, hurting small businesses and their customers.
To avoid a wave of outbreaks in February, the authorities canceled the travel plans of millions of migrant workers for the Lunar New Year holiday, the biggest holiday 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.”
A worker producing engineering equipment for export at a factory in Nantong in Jiangsu Province. Demand for Chinese exports is expected to weaken later in the year.Credit…Agence France-Presse — Getty Images
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 going 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 the 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 Ms. Wu, 33.
This year, Ms. 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.