Menu
Account

Pearls, Angel Wings, and Taxi Rides: The Faces of the Chinese Economic Slowdown

 
 

It takes some drilling down to find and feel the effect of the U.S.- China trade war in China itself. In Beijing, a Western-branded hotel in the center of the city said they had had no decrease in business, and that seemed to be true, judging by the number of clientele throughout the hotel in comparison with this time last year.

In Hongqiao Market, a shopping haven for foreign tourists seeking bargains and locals seeking high-end jewelry at reasonable prices, traffic seemed to be steady in the lower-end shops. Shop owners in the main market, which sells everything from electronics, apparel, accessories, and jewelry, did say that 20 to 30 vendors of the several hundred occupying the market had closed up and “gone back to the provinces,” but also said this was a normal attrition rate. Some just don’t make it.

However, reports from some business owners in Beijing and Yiwu in Zhejiang province support on a microeconomic level key statistics on the Chinese economy at the macroeconomic level, as reported by the South China Morning Post.

Enjoying this article? Click here to subscribe for full access. Just $5 a month.

At Hongqiao, an adjunct building houses vendors of high-value jewelry. Gold, precious and semi-precious stone, and pearl jewelry are sold here for up to tens of thousands of Chinese renminbi (RMB) per piece.

But, according to one business owner, Mrs. Lan, business in that sector has plummeted.

“Most of my high-end clients are local women who are married to successful business owners,” Lan explained. “They will easily 5,000 to 25,000 RMB [$725 to $3,600] for a south-sea pearl necklace, buying new styles every few months to add to their collection. But they have stopped buying in recent months. That business now has dropped by 90 percent.”

And indeed, as SCMP reports, “Retail sales growth decelerated sharply to 8.1 percent from the 8.6 percent rate in October, lower than the 8.8 percent rate expected by analysts polled by Bloomberg. The November growth rate was the lowest since the 4.3 percent gain posted in May 2003.”

In Shanghai, the domestic airport was packed, and high-speed trains going south were full. But in Yiwu, home to the largest small commodities market in the world, the halls were quieter than usual.

Walking among the hundreds of aisles spread across more than four stadium-sized buildings that hold the 60,000-plus vendors in the International Trade City of Yiwu, shoppers were few. However, the vendors here do not make the majority of their sales directly to customers who ply their halls. On the contrary, their largest orders are from the Chinese and foreign trading companies that buy up their goods in bulk and send them around the world. (Yiwu vendors themselves often don’t know the final destinations of their goods.)

So in Yiwu, the appearance of few people can be deceptive.

The small shops, normally ranging from 5 to 15 square meters, do most of their business online, and that primarily on WeChat, China’s homegrown media platform, which has penetrated all levels of Chinese social and business life.

Therefore, the Yiwu market shops may seem sleepy at times, with children playing freely in the aisles, and vendors lounging back at small desks watching kung-fu movies. But the one to two orders a week that come in online buying a container-full of merchandise are more than enough to satisfy business requirements, as well as the payments to the shadow bankers who are often the financiers of the shops they rent or buy, at up to 1 million renminbi per year.

But shop owners, such as Mrs. Lou, say that those bulk wholesale orders are slowing, as well.

Mrs. Lou sells plastic, rhinestone-encrusted tiaras for little girls. She has not had a big order since August, and therefore has plenty of ready merchandise to offload.

Other vendors throughout Yiwu echoed similar concerns.

“It is our Middle Eastern and African customers who are keeping us going,” said one vendor, who sells toys, angel wings, and other children’s merchandise.

But it is not until one begins to talk to those on the lowest margins of the economy that the situation begins to come into clearest relief.

Taxi driver Tao says that Yiwu is the only place where he can earn enough money to send back home to the rural area outside of Yichang, Hubei province, where his small daughter and both of his parents still live. Go to Yichang, 1,000 kilometers west of Yiwu, and you will find only two types of people, Tao says: old and young. People his age, in their 20s and 30s, have all left. There is no work for them, or at least not enough to meet the requirements of modern Chinese society, such as providing a “caili,” or dowry, to a prospective wife’s family.

Questioned on the details, and how his economic situation has been affected by the geopolitics of the trade war, Tao says that he doesn’t understand the trade issues, but he does know that his taxi business has suffered dramatically over the last few months.

Fewer people are coming to Yiwu to shop, he says, and that has driven his income down.

He is already driving 15 hours a day, seven days a week (a very real number to which taxi drivers throughout China have attested for decades), with only ten days off a year for Chinese New Year. Tao says that his take-home income in a good month is 10,000 RMB. In recent months, that income has dropped to 6-7,000 RMB per month, reducing his income by up to 40 percent.

Asked whether the decrease in visitors could simply mean an increase in those who are buying online, a trend in line with both wholesale and retail buying behavior around the world, Tao said he does not think so.

Showing a savvy he claimed not to have, Tao points out that if online business is taking over, then why are Yiwu property prices rising astronomically? A flat, he says, in the central business district of Yiwu, is now up to 30,000 RMB per square meter. That means, in hard currency terms, that a 100 square meter apartment, sold as a bare-plaster wall shell with no interior fit-out whatsoever, not even a toilet, costs well over $400,000.

No, he said, the slowdown is real. Businesses are losing sales. Incomes for people like him are dropping.

“Americans are rich,” Tao said. Shaking his head, he continued, “Chinese products are cheap. I just cannot understand why rich Americans want to buy less, and spend more on each.”

An explanation of the loss of American jobs and stagnating wages in the United States fell on decidedly deaf ears.

Newsletter
Sign up for our weekly newsletter
The Diplomat Brief