Planet Money – China’s weakening economy in two Indicators

Intro

In this episode of “Planet Money,” the focus is on China’s weakening economy and the indicators that reveal the challenges it is currently facing. The hosts explore the concept of “revenge spending” and how it has not played out as expected, as well as the alarming rise in urban youth unemployment. They also delve into the impact of the pandemic and political circumstances on international tourism to China, and the cautiousness of consumers when it comes to spending on big-ticket items. The episode features an interview with Emily Fang, an international correspondent for NPR covering China, who provides valuable insights into the country’s economy.

Main Takeaways

China’s “Revenge Spending” and Inconsistent Consumer Habits

• China’s economy was expected to rebound in 2023 after COVID restrictions were lifted, but evidence of “revenge spending” has been hard to find in official statistics.
• Chinese consumers are more conservative in their spending habits compared to US consumers, and spending on big-ticket items like cars and luxury goods has been inconsistent.
• The revenge-spending story in China has not played out as expected due to inconsistent spending on big-ticket items.
• Spending on big-ticket items has been inconsistent in China, with fewer tourists traveling and reluctance to spend on luxury items.
• No household-focused stimulus has taken place in China, hindering the revenge-spending thesis.

The Alarming Rise in Urban Youth Unemployment

• The Beijing Awards are a made-up award show that honors anecdotal data to illustrate trends in the economy, similar to the Federal Reserve’s Beige Book.
• The Beijing Awards for China highlight the skyrocketing urban youth unemployment rate as one of the most alarming indicators in the country.
• The Chinese government has paused releasing some economic data, so anecdotal and unofficial numbers are being used to understand what’s happening in the economy.
• Urban youth unemployment in China hit 21% in June, with 1 in 5 16-24 year olds without a job.
• Entry-level jobs in law, finance, tech, and government have dried up, leaving young people with degrees struggling to find work in their trained fields.
• Many young people in China work long hours, with a schedule called 9996 (9am-9pm, 6 days a week) being common, despite being technically illegal.
• Young people in China who can’t find work are often in a luxurious position of having other options, but face emotional pressure from their families to find a job.
• Tens of millions of young people out of the labor force in China could have serious long-term consequences for the economy.
• One lost year of employment in your early 20s right out of college results in 13 to 21% lower productivity and wages 20 years later.
• Work is one of the only things that you can choose by yourself, and if you can’t find your footing at work, then you don’t have much meaning.

The Impact of Pandemic and Political Circumstances on International Tourism

• International tourism to China has dropped significantly due to the pandemic and political circumstances, with a 99% drop in people booking tours through recognized companies.
• New regulations and policies have made people wary of investing in China or sending foreign employees there.

Summary

China’s “Revenge Spending” and Inconsistent Consumer Habits

Despite expectations of a rebound in China’s economy and the concept of “revenge spending” after COVID restrictions were lifted, official statistics have shown little evidence of this phenomenon. Chinese consumers are more cautious in their spending habits compared to their US counterparts, resulting in inconsistent spending on big-ticket items like cars and luxury goods. The lack of household-focused stimulus has further hindered the revenge-spending thesis. This cautiousness in consumer spending, coupled with a decline in international tourism to China, has had a significant impact on the economy.

The Alarming Rise in Urban Youth Unemployment

The Beijing Awards shed light on the skyrocketing urban youth unemployment rate in China, which has become one of the most concerning indicators in the country. With the Chinese government pausing the release of some economic data, anecdotal and unofficial numbers are being used to understand the true extent of the issue. Urban youth unemployment reached 21% in June, leaving one in five 16-24 year olds without a job. The lack of entry-level opportunities in fields such as law, finance, tech, and government has left many young people with degrees struggling to find work in their trained fields. Emotional pressure from families adds to the challenges faced by unemployed youth.

The Impact of Pandemic and Political Circumstances on International Tourism

The pandemic and political circumstances have had a significant impact on international tourism to China, with a staggering 99% drop in people booking tours through recognized companies. New regulations and policies have made investors and foreign employers cautious about engaging with China. These factors have contributed to the decline in economic activity and further challenges for the Chinese economy.

Conclusion

The weakening of China’s economy is evident through indicators such as the lack of “revenge spending,” the alarming rise in urban youth unemployment, and the decline in international tourism. These challenges have long-term consequences for the economy, as lost employment opportunities for young people can result in lower productivity and wages in the future. The emotional pressure faced by unemployed youth adds an additional layer of complexity to the situation. Understanding these indicators and their implications is crucial for assessing the state of China’s economy and its potential paths to recovery.