Chinese govt looks to make window shoppers spend
Wangfujing in downtown Beijing is the Chinese capital’s most famous shopping district, and one that should be overflowing with bargain hunters on their lunch break. Instead, shops stand empty and potential customers express only the briefest of interest in the goods on display. The country’s economy may be booming, but China’s consumers are still reluctant to part with their money.
Huang Weiping, Professor of Economics at Renmin University explains:
“It gradually became traditional in China to put money away for a rainy day – to make provisions for the future instead of using tomorrow’s money to realize today’s dream. So, Chinese tradition is to be hard-working, save and make steady progress.”
Over the last decade, Beijing has used cheap labour and low manufacturing costs to attract investment and drive growth with exports. However, that policy has seen domestic consumption fall to less than 50% of the GDP, an imbalance that needs to be corrected if China is to lessen its dependence on consumers in other nations.
And that is the problem the Chinese government now faces: how to convince a nation of window shoppers to dig deep into their pockets and spend the economy out of its current slump and continue spending in the future in order to maintain the country’s economic growth.
Professor Huang Weiping says “it would probably be better for China to enlarge its consumption gradually, have it follow a growth in incomes, and it is important for social stability that people make provisions for the future.”
However, he added, “younger generations do not think that way, and when they become mainstream consumers, concepts of consumption here will change.”
The government’s efforts have been welcomed in many quarters, although those on low incomes will find it hard to answer the call.
“With my budget I can afford very little for clothes – 5 euros,” one of the locals says.
“I think it is pretty good to encourage consumption because it stimulates domestic demand. Right now it’s hard to find work, and domestic demand can boost business and jobs,” another one added.
And right now that is the government’s main goal: keep the economy growing to maintain social stability. This goal can only be achieved if the leadership can convince its population to spend.