Why people in China aren’t spending

Hello Greg Jenner here, I'm the host of Your Dead To Me,

the BBC Comedy Show that takes history seriously. Every episode I pair up a top historian with a fantastic comedian and we have a lovely funny, fascinating chat about a different subject from world history. And in this new series, we're beginning with an epic voyage

through the story of Homer, the Iliad, and the Odyssey. And that's with Kyle Smith-Bino joining us. And then we'll be learning about France's golden and the racist, discredited pseudo-science of Hugh Jennerx with Desert Ray Birch.

We'll meet many medieval saints in their bone boxes with Rachel Parrot.

So, if that sounds like your sort of thing,

listen to your dead to me wherever you get your podcast. Thank you, bye! China's greater selling its products to overseas buyers, but inside the country, there seems to be a problem Juliana. That's Rodrigo.

This has been a problem since the beginning of COVID, but, you know, people just thought, you know what? Let's wait until the economy recovers and exits COVID and see what happens. But since then things have gotten kind of worse and worse. And this is largely down to property market and a lot lack of jobs.

And the government has been strongly to encourage people to buy more products

“of them, so today we're asking why can't Beijing get people to spend money?”

I'm Mariko and Singapore, and this is Asia-specific from the BBC World Service. Twice a week, we bring you Asia-Pacific stories, and packed by those who know them best. I have two guests who follow the Chinese economy very closely. Juliana Liu is actually a former colleague of mine,

and she was a Hong Kong correspondent for the BBC, but now she's a columnist for Bloomberg opinions, Asia team. Welcome to Asia-specific, Jill. Great to be here. I also have Max Zenglain, he's the Asia-Pacific Economist at the Conference Board,

which is a think tank and research organization. Thank you so much for coming on the Pod Max. Thanks for having me. So we've been talking about China's economic challenges for quite some time, but today we're doing this episode because recent data show that the economy

is growing at the weakest pace in over three years. So Juliana, can you maybe paint the picture of the broader trend some of the issues facing the Chinese economy? We have essentially two things going on. Experts are going absolutely gangbusters.

So if anyone on this pod is in the market for a new electric vehicle, depending on what country you're in, you might have, a likes of BYD or Cherry offering it to you at a really, really good price. At the same time, though, the domestic economy is extremely weak, and people just don't have the will to really go out and shop,

to shop and to purchase as they used to do, certainly as they used to before the start of COVID. And this is creating some real challenges, not just for policymakers, within China, but also for the countries that trade with China, because they're seeing their markets being overrun by a lot of Chinese exports.

Max, as Juliana said, the latest data showed export are still booming. So can you just explain when we're talking about weak consumption,

“weak spending in China, how weak is it, and why is that a problem?”

I think maybe just for context, this is a structural problem of China's economy. It's also nothing new. It just became, I think, more pronounced after the pandemic, there was this hope that there would be revenge spending, and people just would know return to old patterns,

and based also on the economy, or the population becoming, more wealthy that they would return to spending.

But this has not materialized, and it was basically also less unrest,

and hence has become more entrenched. So the real estate market, which is the key asset class, where people put their money to increase their wealth, deteriorated. It's been contracting for four years now. Then you have the youth unemployment, and if you're a middle-aged family,

you have your real estate deteriorating, your kids that you sent to universities not getting a job, and you're really feeling the pinch, and you're not going to go out and be a happy spender, especially on a big ticket item.

“So I think this is part of the problem that has been going on for years now,”

and just made the problems worse that we're seeing right now. But why is it important for China to see consumer spending money, and I guess rely less on trade, the economy is still expanding

So I think one issue would already be because you mentioned

what is the problem? It depends on whose problem it is.

“And I think at the moment, I don't think it's a key policy priority for the leadership in Beijing.”

They have other priorities, it's actually strengthening the manufacturing base, it's strengthening economic security as there's more geopolitical tensions. So the domestic side is not so much priority. And I think to be fair, it's weak, but it's also not collapsing. But nonetheless, because of the scale of the Chinese economy,

it's having a global impact through the massive exports that we really talked about.

And Jules, you recently wrote a column about this. Haven't you about how Beijing is not maybe putting the priority on boosting consumer spending? But can you maybe put this in comparison to other major economies? How much consumer spending accounts for the Chinese economy versus other major economies? Yeah, so I recently wrote about a plan that seemed really exciting on papers.

“So about two weeks ago, China came out with its first ever five-year consumption plan, okay?”

I admit for the non-nerds out there, it's not that exciting. But it was the first time we've seen something like this from China.

In terms of why it's important, I mean, structurally, China's consumption has always been kind of weak.

As percentage of its entire economies, but 40%, that compares to 50% for Japan, which is already pretty low, so it's much lower than Japan, and way lower than the West, right? And the reason why it's important is because if you imagine if people are spending again, that will live China's own growth, and also make its problems with its trading partners a lot smaller. So if Chinese shoppers were outspending again, they would be buying more products from Europe,

buying more products from the West, from Southeast Asia to the West, and the US, and you would expect to see some of these issues become less of a problem. I mean, it's quite ironic, right? Because as you said, a lot of global consumers outside of China, or buying quite a lot of Chinese products in yet within China, they're not spending as much money. So what are the products that overseas buyers are actually really keen to purchase from China,

and yet within China, those domestic consumers on to Japan? People outside China are pretty much buying everything. Obviously, the big, kind of ticket items, cars, electronics, but also stuff that is being sold

“by Xi'an, Xi'an, and Timo, and Riko, you must have Chen out for children,”

but my children taught me a new phrase recently, so they call it "its from Timo," when something is not very good. Something is poor quality, or just generally not good. So it's become a bit of a catch phrase, although to be fair, some other products are very serviceable and good enough quality for the price. But you know, it's the fact that this phrase is become very popular among teenagers and children. I think that shows the extent to which

you know, people overseas outside China are buying Chinese products, they're buying a lot of Chinese products, almost everything. So of course, we have kind of the the cheap consumer goods that are maybe not so great in quality in some case, but still good enough in some cases, but you do have Chinese good also moving up the value chain in some sectors dominating this. We see it in EVs, where you have massive exports and also demand for it, and they're challenging,

well, very complacent, traditional car manufacturing brands at the moment. So they are feeling that. But it does connect also, let's say the scale of which how this is happening connects also to the domestic weakness. And EV equals is actually a great example. So this is something where China rapidly build up its capacity and capabilities, but the domestic market at the moment is very weak. And the latest numbers they come out for June, it's contracting. And the share of exports,

I think for June, it reached around 40% of the EV equals that are produced in China that are being exported. So that's where I think where this weakness comes in at the moment. And entrenched problem of I think the consumer here is that it has not been the priority. Chinese economic policy prioritizes exactly something like building EVs and leapfroving into new technologies. But really strengthening consumption is not so much the focus and as the new five-year plan that we all were

excited about, the detail is then disappointing. Because often when every China's consumer or consumption policies, they read light supply, side policies. The focus of the last plan that we're

But I would argue that that's really not the right way to look at it because, you know,

despite Jen Alpha around the world saying things like it's from Timo, actually Chinese products, quality wise have indeed come a long way. And within China itself, I don't think

“people aren't shopping because they don't think the quality is good enough. In fact, I think”

there's a lot of really great quality products out there. EVs are just one area but also fashion, handbags, cosmetics, you know, I write about and I try these things. And I think actually the quality often is really good. But in terms of specific measures to boost demand, to get consumers, to spend money, what are the policies that you could suggest, Max, maybe? You know, if you were

to be advising the Chinese government. A typical approach would be to give subsidies or vouchers.

But again, this is a short-term impact that really benefits the suppliers, so the production and not so much to consumer in the long run. If you're still struggling with your kid not finding a job in your real estate, losing value. And it goes really into the boring stuff and also the really hard stuff to fix in economy. And that is that fixing retirement, social security, these type of issues that are a massive undertaking. And this has been in the books for China for

“quite some time, but they've been kicking down the can. I think the thinking was China develops”

gets more wealthy, and these will magically go away. And now we're at a point where this is not happening,

and the external impact is becoming much more pronounced.

Hello, Greg Jena here. I'm the host of Your Dead To Me, the BBC Comedy Show that takes history seriously. Every episode I pair up a top historian with a fantastic comedian and we have a lovely funny, fascinating chat about a different subject from world history. And in this new series, we're beginning with an epic voyage through the story of Homer, the Iliad and the Odyssey. And that's with Kyle Smith, by no joining us. And then we'll be learning about France's golden

and the racist, discredited pseudo-science of huge genics with desert-ray birch. We'll meet many medieval saints in their bone boxes with Rachel Parrot. So if that sounds like your sort of thing, listen to your dead to me wherever you get your podcast. Thank you, bye! Given the spotlight on this week consumption, is it going to become Beijing's priority, or judging from this latest plan that we've been talking about, where it seems like they're not even expecting

a consumer spending to grow as much as, you know, in the previous five years? Does that mean that Beijing still doesn't see it as a priority, Jena? We see that exports are very, very strong, and this is part of a grand plan in terms of trying to really moving massively, moving up the industrial kind of supply chain. There's a huge focus on technology and AI and the industrial

“side of things. So as long as that side of things is going, and it is for the moment, I think it”

actually gives, you know, the government some breathing space. I think if we start to see exports fall off, I think China will then have no choice, really, but to undertake some of these difficult boring, expensive policy changes that it would need to undertake in order for then for for people to start spending again. And Jena touched on this, it's like the earlier, but Max, if you can just explain why, you know, for viewers and listeners outside of China,

why should the rest of the world care that Chinese consumers aren't spending as much money? How does it affect the rest of the world? You as an individual, my thing, what's the problem? It's fantastic. I don't know, my phone is cheaper, my laptop is cheaper, my whatever is cheaper. Everything's getting cheaper. That's great for you as an individual, but as the entire economy, it will erode the industrial base in the foundation of the country you're living in. And I think that's a problem.

And I think there's a lot of attention to, at the moment, it's for the automotive sector in Europe, how they're struggling with Chinese EVs that are good and quality, cheap and price, but it's not only a story for, you know, the richer countries. If you think about in Southeast Asia, actually Indonesia has been one of the countries that has been making one of the most trade complaints against China, because it's been affecting their textile industries, their metal industries.

So this is something that you as a consumer might be benefiting from, but if the jobs in the

you know, the frustration of those middle class in China, not hit that kind of tipping point.

“Do you foresee that happening in the future and, you know, as Max asked, when it, when Beijing”

actually has to address weak consumption issue by boosting household income and so on, do you think they can do it? I feel like the pressure if it comes will be external. It will be, you know, big and small trading partners complaining. Max absolutely right.

The impact will differ depending on the country. For rich countries, there will be

impact will be different than for kind of middle income countries, because a lot of countries,

“especially in developing areas, they also want to climb up the value chain. That's kind of a”

technical way of saying that they also want to have factories produce. They want to be competitive eventually against Chinese products. And China is plotting that it's products everywhere, then they will have less opportunities to do that. And I do believe China has the ability to to change. It can. It's just, it doesn't need to right now, because exports are doing well, but actually Max has put it really, really well. There are a lot of things that China can do.

“It's been great to get your thoughts on this ongoing issue. Thank you so much, Jelietta and Max.”

You've been listening to Asia, specific from the BBC World Service, with me, Marie-Core in Singapore. This episode was produced by Bill Bertels, Derek Tsai, Rachel Lee, and Cordelia Lee. Don't forget, you can watch us too on the BBC World Service YouTube channel. And if you have any questions or thoughts on what we covered in this episode or any other stories from the region, we would love to hear from you. You can get in touch with us on email.

Asia's specific at bvc.co.uk. And do follow all subscribe so you never miss an episode.

Until next time, goodbye. Hello, Greg Jenner here. I'm the host of Your Dead To Me, the BBC Comedy Show that takes history seriously. Every episode I pair up a top historian with a fantastic comedian and we have a lovely funny, fascinating chat about a different subject from world history. And in this new series, we're beginning with an epic voyage through the story of Homer, the Iliad, and the Odyssey.

And that's with Kyle Smith by no joining us. And then we'll be learning about France's golden and the racist discredited pseudo-science of Hugh Jenner's with Desert Ray Birch. We'll meet many medieval saints in their bone boxes with Rachel Parrot. So if that sounds like your sort of thing, listen to your dead to me wherever you get your podcast. Thank you. Bye!