Will China’s consumers save the day?

If sky-high US tariffs hurt the country’s exports, domestic spending will help make up for it, Beijing says. But shoppers were skittish even before the trade war, writes Vivian Wang from Beijing

- Vivian Wang

Asthe United States and China barrelled head-first into full-fledged trade war last week, one of Beijing’s most fashionable shopping districts was still bustling.

People browsed a high-end perfumery, lounged outside coffee shops and waited in a wrap-around line for a trendy bakery.

That is just the type of scene the Chinese government wants to see as it steels for what could be a total break-down of trade with the United States. As President Donald Trump maintains tariffs of at least 125% on its goods, China has vowed not to back down. Besides hitting back with its own tariffs — 84% on all imports from the United States — the government has promised to make up for the blow to exports, on which China’s economy currently relies, by getting its people to spend more.

“In the face of high tariffs continuing to shrink the space for trade with the United States,’ read a commentary on Sunday in People’s Daily, the Chinese Communist Party mouthpiece, China will “make consumption the main driving force and ballast stone of economic growth, and deliver on the advantages of a super-large market”

But that is easier said than done.

Domestic consumption in China was anaemic even before the tariffs. The post-pandemic economic recovery has been lacklustre, factories have shuttered and youth unemployment is high. Home prices, the bedrock of many middle-class Chinese families’ wealth, have plummeted.

Even the busy scene at the Beijing shopping area, Taikoo Li, was deceptive. When Chinese people do go out, they increasingly tend to look for bargains or simply browse.

Qu Nan, the 38-year-old founder of a construction company, was sitting at a Starbucks in Taikoo Li. But he wasn’t drinking anything, just meeting a friend.

Before the pandemic, Mr Qu would casually spend $25 to $40 for a meal when eating out. But his business had fallen by 20% since then, and now he was willing to spend that much only for high-quality food.