The Chinese government has just released new economic indicators after the long holiday in May. Our correspondent reports from Shanghai on the current situation in the world’s second largest economy.
SCOTT SIMON, HOST:
China has just finished its five-day May Day holiday. Hundreds of millions of people visit the roads. This week, the government released some preliminary statistics that paint a much more optimistic, or at least less pessimistic, picture about China’s economy. NPR China correspondent John Ruwitch is in Shanghai. John, thanks for being with us.
JOHN RUWICH, BYLINE: Well, Scott.
SIMON: What numbers did you get?
Ruwich: Well, these are the statistics for the holiday we call Golden Week here in China. So this is just a snapshot. But the headline figure is that tourists took almost 300 million trips during the holidays. And importantly, this number is up 28% compared to 2019. 2019 was the year before the pandemic, when we had normal travel and normal vacations here in China. It’s rapidly increasing. In recent years, tourism has become a major pillar of household consumption. There was pent-up demand due to the pandemic. So this is good in a way, but not surprising.
SIMON: What is Shanghai like where you are now?
Ruwitch: Oh, good. Obviously, Shanghai is the wealthiest city in the country, so it may not be the most representative city, but things were pretty lively during this holiday. To find out, I went to a coffee festival. There were actually two. A dueling coffee fest was being held here in town. And one of them sounded like this:
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Ruwich: I talked to a few people there, including the guys running the booths. One of them was a man named Douglas Yu who was selling gelato.
Douglas Yu: (Speaks a language other than English).
Ruwich: He said he came in with very high expectations. People like gelato. it makes them happy. It was kind of warm, wasn’t it? And his sales actually met that expectation, so things were good. Interestingly, I’ve been traveling around the country for the past year or so. This kind of food festival has become very popular these days, and it’s not just for big cities. Mike Wester runs a company in Beijing that does many of those things. He plans to hold a sausage festival in a few weeks. Local governments used to be very wary of things like this, but now they are very cooperative.
Mike Wester: In an effort to stimulate the consumer economy, many cities are recognizing that holding weekend food festivals, week-long festivals, etc. is actually very good for the economy. It’s starting.
Luwich: It shows that the government recognizes the need to stimulate consumption.
SIMON: Do such gatherings improve economic status?
Ruwich: Well, that’s the problem. So the economy, of course, has not recovered from the end of coronavirus restrictions here, as expected. The government has been telling a good story about increasing consumption. You know, events like this and coffee festivals are definitely a lifeline for some restaurants and small businesses that have been struggling in recent years, but on a smaller scale. For example, the number of tourists has increased sharply. The government says revenue did not grow as quickly this holiday season. So people were out and about, but they weren’t spending a lot of money.
I saw a similar scene during Golden Week last October. Ernan Cui is an analyst at his Gavekal Dragonomics in Beijing. She says it’s related to other more fundamental concerns in the economy. In particular, the labor market remains weak and wage growth has not returned to its pre-COVID-19 trend line.
Hernán Cuy: Another pretty good piece of evidence is consumer surveys showing that consumer confidence remains low.
Ruwich: It’s just that people are not satisfied with the current state of the economy, and there are big challenges, right? Youth unemployment is one of them. The great real estate recession is still being resolved. There are deflationary pressures, and the government is being very cautious about economic stimulus measures.
SIMON: Sounds like you have a lot of work to do.
Ruwich: Yes, there is. And there are many pessimistic views. I spoke to Nicholas Lardy about this. He is a longtime China watcher at the Peterson Institute for International Economics in Washington. He is less pessimistic and recently wrote about it in the Journal of Foreign Affairs. He points out that consumption growth has actually been pretty good for China. Last year, it increased by about 9%. In the first quarter of this year, it was just over 8%. Of course, much of that is due to pent-up demand during the lockdown period during the pandemic. This is Lardi.
Nicholas Lardy: The question we really want to know is how much money can we sustain on an ongoing basis once this revenge spending is fed throughout the system?
Luwich: Only time will tell. The government certainly wants consumption to become a bigger driver of the economy, which is why it is taking these coffee festivals and many other measures.
SIMON: So, John, will the disagreements between China and the United States and China and Europe affect the Chinese economy?
Ruwitch: Those issues are certainly looming. On Thursday, China released trade statistics for April. Both imports and exports increased. That was after it collapsed in March. But clearly there are significant trade frictions between the US and China, and between the EU and China. And since economists and other observers don’t see a quick fix, the effects could become quite clear in the future.
SIMON: NPR’s John Luwitch in Shanghai. John, thank you so much for being with us.
Luwich: You’re welcome.
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