Beijing – As the USA and China dive heading into a Commercial War Total this week, one of Beijing’s most elegant shopping districts was still busy. People sailed through a high standard perfumery, rested in cafes and waited in a line that surrounded a “last fashion” bakery.
This is exactly the kind of scene that the Chinese government wants to see while preparing for what can be a total collapse of trade with the United States.
While the president Donald Trump keeps rates of at least 125% About its products, China promised not to retreat. Besides retaliation with their own rates – 84% On all imports from the United States – the government has promised to compensate for the impact on exports, which the Chinese economy currently depends, encouraging its people to spend more.
“Given the high rates that continue to reduce the space for trade with the United States,” said a comment on Sunday at People’s Daily, the Chinese Communist Party spokesman, China “will make consumption the main driving force and the foundation of economic growth, and will take advantage of a vast market.”
But this is easier to say than to do. Domestic consumption in China was anemic even before tariffs. Postpandey economic recovery has been unsatisfactory, factories have closed and youth unemployment is high. Property prices, the basis of the wealth of many Chinese middle -class families, plummeted.
Prudent consumption habits
Even the busy scene in Beijing’s shopping area, Taikoo Li, was misleading. When the Chinese leave, they are increasingly tending to look for bargains or simply “take a look.”
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Qen, 38, founder of a building company, was sitting on a Starbucks in Taikoo Li. But he wasn’t drinking anything, just meeting a friend. Before the pandemic, which used to spend casually from $ 25 to $ 40 on a meal outside. But his business has fallen 20% since then, and now he was willing to spend this amount only on high quality food.
“For this price, I could very well cook for myself,” he said. “People’s consumer habits have changed. Everyone is making directed and economical choices.”
The trade war could make people even more cautious about consumption, just when this becomes a greater priority for the government.
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If exports dramatically slow, it could hurt all, from clothing manufacturers in southern China to manufacturers of appliances on the east coast. This, in turn, could lead to lower salaries or greater unemployment. “The economy is all integrated, and producers are also consumers. They are the same people,” said Zhou Mi, a researcher at an institute affiliated with the China Ministry of Commerce.
Before commercial tensions began to climb, there were signs that the Chinese were starting to spend more. Government incentives to exchange old cars or electronics have increased sales.
Optimism retreated
A quarterly Chinese consumer survey released by Deutsche Bank in March found that 54% of respondents felt financially better than a year earlier, and that 52% – the largest number in a year – were willing to increase their spending.
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During a long holiday for the China tombs cleaning festival this month, travelers crowded the sights and restaurants. They made 126 million domestic trips and spent about $ 8 billion, according to official data. Both numbers represented increases of more than 6% over the previous year and were above the pre-pound levels.
But then Trump imposed his new impressive tariffs on China, who responded with corresponding tariffs. In a way, Americans are more likely to be directly affected by tariff war price increases, as imported goods make up the texture of daily life in the United States.
Imports from China to the US are mainly intermediate products such as soybeans and agricultural equipment, not consumer goods. And China has been working to diversify its supply chains since Trump has imposed tariffs in its first term.
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Brazil, not the United States, is now China’s main soy supplier. Many prominent American brands in China, such as Nike, will not have to dramatically increase prices, as many of their products are manufactured outside the United States.
Some American electronics or cars, such as Chevrolet, would see prices shoot, but US automakers were already losing space in China.
Ye Yi, 42, a wine importer in Beijing, would be harmed by tariffs in theory. He sells Valley Napa wine for about $ 134 the bottle. But he said he wasn’t worried about China’s new tariffs, because no one was buying such expensive wines.
They were popular among entrepreneurs who promoted banquets, but as customers became more aware of costs, they opted for cheaper wines from Australia or Chile. YE said his business has fallen from 70% to 80% since the beginning of 2023. He doesn’t plan to ask for more American wine and is looking for ways to leave the industry completely, he said. “We’re setting up a donkey while we look for a horse,” said Ye, using Chinese languages on how to turn around.
In fact, the biggest problem for Chinese consumption is not prices on the rise, but the fact that people are not spending much to start. Many Chinese companies have been entangled in harmful price wars as consumers require lower and lower prices.
Some of the fastest growing brands in recent years have been the ultra -bandas. Quar, a Chinese travel company, partially attributed the increase in trips during the cleaning festival of the cheapest hotel rooms.
Uncertainty is the standard
Even though tariffs hit Chinese manufacturers, reducing demand in the United States or making US intermediate goods more expensive, they can try to absorb costs on their own to remain competitive.
And any recent recent gain in consumer confidence may already be disappearing. Chinese actions fell sharply this week, although the government’s efforts to stabilize markets helped.
In manufacturing centers like Guangzhou, exporters saw canceled orders. Many economists agree that in the long run, making consumers spend more will require significant investments in China’s limited social protection network.
Medical costs for serious illness can be devastating to families. People in the countryside, in particular, have almost no pension and face difficulties in accessing education or health in cities.
“When people feel safe about their retirement and feel safe about their finances after important life events, such as illness, so I think they will definitely be more willing to spend,” said Xu Tianchen, China analyst at Economist Intelligence Unit.
Historically, Chinese leaders have been cautious about expanding the protection net, citing, among other things, the concern to encourage laziness. But Xu said he is optimistic that Beijing is now serious about reforms to support consumption. The government said last month that it would work to increase wages, pensions and medical benefits.
“Because there is no way to go back to the US-China trade, I would say, and especially on China’s side, they have to be realistic about finding the next engine for the Chinese economy,” said Xu.
Substantial changes like these will probably take years. Meanwhile, consumers will probably remain cautious about the type of spending China needs.
At Taikoo Li, the Shopping District, Zhao Yong, 42, a photographer, said he was hoping that the government issued spending vouchers and implementing other policies to mitigate the effects of trade war. But he was investing his own gold money – an increasingly popular option for nervous Chinese investors.
“Otherwise, what can you buy? You can’t buy a house. You can’t buy stocks. It would be foolish to start your own business,” Zhao said. “It’s just because our perspective on the overall environment is pessimistic that we choose this.”
This article was originally published in The New York Times.
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