Consumer Anxiety Poses Threat to China's Economic Plans ; Once-Flush Middle Class Is Reducing Spending, Slowing Engine of Growth

By Wong, Edward | International New York Times, August 31, 2015 | Go to article overview

Consumer Anxiety Poses Threat to China's Economic Plans ; Once-Flush Middle Class Is Reducing Spending, Slowing Engine of Growth


Wong, Edward, International New York Times


Middle-class Chinese are reining in spending amid the economic slowdown, damaging Beijing's hopes to push consumer spending as an engine of growth.

In recent days, an advice column has circulated widely on China's most popular social media app. Titled "Guide on Safe Passage Through the Economic Crisis," it is aimed at young Chinese urban professionals. Its nuggets of wisdom include: "Work hard at your job so you are the last to be laid off" and "In an economic crisis, liquidity is the number one priority."

Zhang Yuanyuan, 31, a bank teller in Shandong Province, is among the thousands of people who have shared it online.

"Last year we didn't have any year-end galas or a bonus," she said in an interview. "I think this year will be the same."

"I try to spend less," she said, adding that she now buys cheaper clothes online instead of shopping in high-end malls. "And I started car-pooling with co-workers to save on gas."

Many young middle-class Chinese who grew up during the nation's glittering boom years, when double-digit growth was the norm, are suddenly confronting the shadow of an economic slowdown, and even hints of austerity.

They are canceling vacations and delaying weddings and even selling recently purchased apartments to have cash on hand. Those who have lost money in the stock market crash are especially anxious. Their angst poses dual problems for China's leadership. The ruling party bases its legitimacy on delivering high rates of growth and employment. It also hopes to encourage consumer spending as a new engine of growth as the manufacturing sector slows and to nudge the economy away from an investment-driven model. Eroding confidence threatens both goals.

These days, Chinese are using the social media app WeChat to look for news and advice on the economy rather than the state news media, which, at the orders of the Communist Party's propaganda department, have had only bare-bones reporting on the stock market crisis and the broader concerns over slowing economic growth.

This month, China's central bank devalued the Chinese currency, the renminbi, by the largest amount in decades, signaling to outsiders that officials were worried about China's growth rate, which the government had projected at 7 percent for the year. Then the sharp drop in the Chinese stock market last week, following a steep fall that had been slowed only through muscular government intervention, destabilized stock markets worldwide.

Through censorship orders, Communist Party officials have been trying to blunt the dire news at home. Not only have the main party newspapers refrained from publishing relevant articles on their front pages, but security officials have shown a willingness to go after Chinese reporters whose stories deviate from the official narrative.

On Tuesday, a reporter for Caijing, a respected financial newsmagazine, was taken away by the police to "assist in the investigation of" fabricating and spreading false information on futures trading, according to Xinhua, the state news agency. Caijing had published an article on July 20 by the reporter, Wang Xiaolu, saying that the Chinese Securities Regulatory Commission was looking to withdraw funds from the turbulent stock market.

Despite Mr. Wang's detention and a denial of the report from a commission representative, Caijing has kept the article online. The magazine released a statement saying it did not know why the police had detained Mr. Wang.

But censors have yet to prevent people from using search terms related to the economy or the stock market on social media networks, so discussion is thriving online.

"In the absence of information about the stock market on official media, Chinese investors are relying on social media, primarily the two 'We's -- Weibo and WeChat -- to get news about the economy," said Xiao Qiang, the founder of China Digital Times, which tracks China's media censorship.

He noted that WeChat was particularly popular because it was less "polluted" by posts from government-supported Internet users and because people could easily share news articles on the economy from Western news publications, especially stories already translated into Chinese. …

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