China’s postpandemic economic recovery shines light on a growing rich-poor divide

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For more than 15 hours, Li Jiaqi and Huang Wei stared into cameras and persuaded a nation of eager buyers to spend billions. Mr. Li and Ms. Huang are China’s most accomplished livestreamers, digital hucksters who broadcast through an app connected to China’s biggest online shopping platform. It makes buying so simple – a few taps, five seconds at most – that it has become routine for tens of thousands of goods to sell in a few seconds.

But even by that standard, Tuesday marked an extraordinary night. It was the beginning of the Double-Eleven holiday shopping season and Mr. Li and Ms. Huang, who operate separate selling outlets, together counted more than 310 million views of their video streams. They sold Skechers shoes and electric shavers, Guerlain Orchidée Impériale Black facial cream at $2,222 per 50 mL container and two-night stays at an Accor hotel near the North Korean border for $600.

By the time the night was over, they had sold $1.35-billion in goods, according to Chinese news reports. (Alibaba, which operates the platform the two livestreamers use, does not provide detailed sales statistics.)

“They are selling more than malls are,” said Elijah Whaley, chief marketing officer at ParkLu, an influencer marketing platform.

“They are killing it.”

So, too, it seems, are the people doing all of the buying. As many other countries plunge back into pandemic lockdowns and a new round of economic distress, the frenzied buying this week suggests that at least some Chinese consumers have shaken off coronavirus worry.

This week, China released economic statistics that showed third-quarter retail sales rising 3.3 per cent over 2019, the service sector up 4.3 per cent. Catering and food services saw growth for the first time this year, urban unemployment diminished and disposable income shot up 6.9 per cent. “Consumer behaviours have shown signs of normalization,” HSBC greater China economist Jingyang Chen wrote.

“The word to describe the attitude of Chinese consumers is resilience. We have strong tenacity,” said Ruan Jing, a statistician at Capital University of Economics and Business who has tracked Chinese consumer confidence since 2008. Prof. Ruan creates an index, where anything over 100 is positive. The index released this month came in at 104.3, even better than the 100.65 in October, 2019. “So we can also conclude that when the country responds well to threats, the consumer confidence also improves.”

The Chinese government has pointed to the return of individual spending as a pillar of a recovery that stands to make it a leading global force in economic performance this year. Outside China, too, the return of the consumer has spelled salvation. Global luxury brands will likely see half their worldwide income from China this year, consultancy McKinsey has estimated. Domestic manufacturers have also profited.

“Production lines in many Chinese cities have fully resumed, and productivity has nearly equalled levels from before the COVID outbreak,” said Li Youhuan, a researcher at the Guangdong Chinese Academy of Social Science. “The resumption of work definitely strengthens consumer confidence.” And, he said, spending that boosts the Chinese economy helps elsewhere, too. “Against the current backdrop, every single yuan we spend contributes to the revival of the world economy,” he said.

But China’s recovery is by no means complete and the spending that has grabbed headlines has masked a deeper malaise, one with the potential for long-standing consequences for a country that had already begun to see the lights dim on its most ebullient days of growth before the virus struck.

Indeed, for Western economists examining China, one of the most striking features is the relative slow recovery of spending. Before the pandemic, retail sales were growing at more than 8 per cent, faster than today by a wide margin. Tourist travel during the National Day holiday period this year fell by 20 per cent. China’s overall third-quarter GDP expansion of 4.9 per cent came in below forecasts, and well below the pace of expansion last year.

“It’s been a surprise how long it’s taken for consumption to come back,” said Shaun Roache, chief Asia-Pacific economist at S&P Global Ratings. “Even now, I would say that it’s coming back gradually rather than surging.”

He attributes it to a “large income shock” in the first half of 2020, in which large numbers of people lost jobs, saw salaries cut or experienced delayed wages as authorities shut down large parts of the country to halt the spread of the virus while offering little direct support to workers.

“The worry I would have is that the pandemic has permanent effects on the way consumers save and spend,” Mr. Roache said. Over many years, a nation of savers had begun to embrace spending. The pandemic once again rung home the value of a full bank account. “If consumers learn that during shocks, their income will fall substantially and there won’t be much help from the government, they’ll end up saving,” Mr. Roache said.

It all points to what Mr. Whaley calls a “steep economic divide” in how China is recovering from the pandemic. “The higher up the socio-economic ladder you go, the better things are.”

For those with money, China has been caught up in a burst of “pride-driven optimism that’s fuelling shopping,” said Hans Lopez-Vito, chief operating officer of BBDO Greater China, whose clients include Mercedes-Benz, S.C. Johnson & Son and Mars.

Things have returned to normal to such an extent that a 2019 marketing campaign could be reprised again today, he said.

But it’s also a return to the anxieties that had already begun to accumulate before the coronavirus began its spread.

Indeed, the pandemic has amplified those concerns, adding rather than diminishing insecurities in a country where overall growth is slowing and future prospects no longer look as bright.

What weighs on people today is “the knowledge that life is not as easy in China as it used to be. Once upon a time, as long as you had a good job, you would succeed and ride on the natural growth of China, which was 10 or 11 per cent,” he said. People now feel that it’s “much more competitive. It’s much harder compared to before.”

While Chinese statistics show that the country’s migrant work force is largely back to work, third-quarter wages only grew by 2 per cent, far off the 6 to 7 per cent in previous years, according to an analysis by Mark Kruger, a former Bank of Canada official who is now global opinion editor at Yicai Global, a Shanghai-based financial media service. Consumption contributed half as much to GDP growth in the most recent quarter as it did last year.

As growth rates slip, savings are accelerating, averaging 37 per cent in the first nine months of this year, five percentage points above the average in the previous three years. “The weakness in personal spending is rather straightforward, given what is happening in the labour markets,” Mr. Kruger wrote this week.

Take Houwu village, situated just 75 kilometres from the 10-storey studio in the tech centre of Hangzhou where Ms. Huang, who is known online as Viya, stages her broadcasts. The village is in Moganshan county, a popular tourist destination. But the lockdowns earlier this year devastated the economy. At Yuxiang Farm Restaurant, Li Wei is still counting his losses. “It’s October now, and for me I’ve only earned back 70 per cent of my losses,” he says. “And the busy season has passed so these days we don’t have many tourists coming. Our life is just okay – we have less money than we did before the pandemic.”

The two tales of China’s COVID-19 consumers come together on the ground floor of an apartment building outside Beijing’s fourth ring road, where Antoine Bunel, Xu Cong and their six-year-old son Jehan run a small media company, producing videos that showcase their culinary lives while promoting products from companies around the world who want to place their goods in front of a Chinese audience.

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The pandemic has been good for business. With people locked at home, the family’s wholesome content and baking skills won them hundreds of thousands of new online followers. Like elsewhere, the pandemic drove people in China into the kitchen, where some gained a new love for bread.

“There is clearly no recession as far as how it feels right now,” Mr. Bunel said. “Everything feels normal.”

But at the same time, the family are keenly aware of a different, less exuberant reality. Ms. Xu picks up her cellphone. She is a member of buying groups on WeChat where “it’s crazy” how much business is being done. “The rich people are still rich,” she said.

Her own social circle is less ebullient. “Eighty per cent of my friends, they tell me that they have shut down the desire to buy things,” Ms. Xu said. “They are trying to have a little bit of savings, because lots of then have other difficulties – family members who got ill. They tell me they have shut down.”

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