China’s much vaunted consumption rise is drivel

Via Bloomie:

While much of the world was under stay-at-home orders on the first day of 2021, Chinese moviegoers packed into cinemas to watch the romantic comedy Warm Hug and the drama A Little Red Flower, generating the country’s biggest New Year’s box office on record. The 545 million-yuan ($84 million) splashed out on movie tickets was the latest sign that household spending in China is above pre-pandemic levels, mainly thanks to the country’s effective suppression of the coronavirus’s spread.

That’s good news for China’s economy, as consumption has accounted for the bulk of growth in recent years, and for companies such as Nike Inc., which reported its China sales soared 24%, to $2.3 billion, in the most recent quarter—the first time they’ve topped $2 billion.

Shifting the economy away from investment in housing and industry and toward consumer demand is a key objective for China’s leadership, as it continues to tweak the development model to deliver continued growth, though with not as much debt. President Xi Jinping introduced the term “dual circulation” last year, signaling a renewed push to build a stronger domestic market to insulate China from the threat of rising global protectionism. In December the top leadership of the Chinese Communist Party used the phrase “demand-side reform” for the first time, confirming that policies geared toward allocating a greater share of national income to households will be a priority in the Five-Year Plan that runs from 2021 to 2025.

Whatevs. For reality, try Micheal Pettis:

We all know the real story. Rebalancing takes reform that redistributes income from vested state-owned interests to households. That’s also a loss of power for the CCP both in terms of central planning control and the rise of richer freedom-loving folks.

So, instead, the CCP hits the brakes for a bit then stimulates again and the entire economy glides downwards towards permanent lower debt-burdened growth instead of the one-off hit and transition to a more vibrant market economy.

As a result, the CCP is preparing new forms of legitimacy for itself by firing up nationalism in opposition to foreign barabarians various.

David Llewellyn-Smith
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Comments

  1. Of course it is, but the CCP needs a story to sell to the dumb foreign bizness interests/politicians on why it is a good idea to sell your country out for (fake) Chinese consumer $$$.

    The Chinese ‘consumer’ story is a central element of the China fantasy….

  2. Similar problem in the Western world with vested interests preventing redistribution of wealth to households resulting in slower growth and social unrest. Different starting point, same result.

  3. Thanks for this. Most useful. Michael is of course correct. Not that any of the chattering idiots writing for Bloomberg or The AFR will understand him.

  4. Reus's largeMEMBER

    Does anyone actually think that any numbers coming from the CCP are anything but total fiction!