At a restaurant in the Chinese capital that serves up low-cost meals to seniors, much of the crowd these days is decidedly less than senior.
For Wang Ran, a 27-year-old designer, lunch at the restaurant in Beijing costs about half what she would normally pay — which makes a big difference as she downgrades her spending amid an economic slump in China that could have global ramifications.
Previously, Wang said, “I pretty much bought things whenever I saw something I liked. But this year, I might have to consider the financial aspect a bit more.”
Decades of breakneck growth transformed China into the world’s second-largest economy and lifted hundreds of millions of people out of poverty, swelling the middle class from 3% of the population in 2000 to more than 50% in 2018, according to the Pew Research Center, which defines middle class in China as living on $2 to $50 a day.
For decades, this modern economic miracle buoyed the ruling Chinese Communist Party, which promised the Chinese public security and prosperity in exchange for severe constraints on political freedom. But a new period of relatively slower growth has created uncertainty for the more than 700 million people in China’s middle class, the largest in the world.
The Chinese economy is still growing, to the tune of 5.2% last year, according to official data. That compares with average annual growth of about 7% last decade, and more than 10% in the 2000s. Some economists say this year’s growth target of about 5% is overly ambitious.
The slowdown means middle-class Chinese can no longer assume continuous economic gains, or that their children’s quality of life will be better than theirs.
Economic concerns have driven Chinese President Xi Jinping to improve relations with foreign companies and governments, including the United States. At a meeting with a group of American CEOs in Beijing last month, he said the Chinese economy was “healthy and sustainable,” an achievement that “cannot be separated from international cooperation.”
But he has also made it clear that his top priority is national security, not the economy, pushing measures such as an expanded anti-espionage law that have alarmed foreign companies. His government has also been reluctant to provide consumer handouts that might boost spending, for fear of promoting “welfarism.”
Even as China reports stronger economic numbers, the public mood remains anxious, said Scott Kennedy, senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies think tank in Washington.
“China is suffering from its own version of long Covid,” he said in an interview in Beijing last month.
The country’s emergence from three years of pandemic isolation has been “quite bumpy” to say the least, Kennedy said.
“You’ve got the housing market which has run into mega headwinds, and you’ve got developers collapsing, prices falling in different cities,” Kennedy said. “That’s the primary asset that Chinese households have.”
On top of the property crisis, China is also grappling with local government debt, a stock market rout, and a decline in exports and foreign direct investment amid geopolitical tensions.
Chinese officials recognize the need to shift the country’s development model away from the property sector and toward consumption, and have vowed measures to boost household spending. But the public doesn’t appear to be on board: Data show the savings rate hit an all-time high in February, while consumer confidence is near a record low.
The reluctance of Chinese consumers could be a problem for the U.S. and other countries, which have voiced mounting worries that Chinese exports could flood their markets in a bid to find willing spenders.
In a visit to China that ended on Tuesday, Treasury Secretary Janet Yellen focused on what she calls manufacturing overcapacity, particularly in electric vehicles and solar panels, both sectors that U.S. officials are trying to develop at home.
Chinese officials say such accusations of overcapacity are groundless, and that foreign governments are trying to suppress China’s development.
‘Reverse consumption’
The economic anxiety is on display all over China.
On social media, users share hacks to save money. Public libraries are filled with working-age people who are searching job sites and polishing resumes or who just need somewhere to go.
Young urban professionals also appear to be driving a surge in sales of lottery tickets, which reached a record 580 billion yuan ($80 billion) last year, according to data from the Finance Ministry. About 85% of purchasers were ages 18 to 34, compared with about 55% in 2020, Chinese research firm MobTech reported.
Young people in China have to contend with a higher unemployment rate, which reached 14.9% in December for those ages 16 to 24 compared with 8% in the U.S., according to the Federal Reserve.
Chinese professionals who are further along in their careers are also facing job insecurity, some of them for the first time.
