Shop till you drop could have been coined for affluent Chinese consumers before the Covid-19 crisis.
But the origins of the phrase appear to date back to the early years of the 20th century with the catchy line particularly popular during America’s Roaring Twenties.
A century later, Xi Jinping’s government will be hoping domestic spending power can kickstart the world’s second-largest economy.
Crucial to this will be the e-commerce sector, which was valued at US$2.3 trillion, or 52% of online sales worldwide, last year.
“China’s e-commerce growth has been driven by the creativity and tenacity of its entrepreneurs and aided by supportive government policies. A sector that was once viewed as a collection of copycats is now producing globally-used apps,” Cheng Li and Ryan McElveen, of the John L Thornton China Center, said in a report for the Brookings Institution, a Washington-based think tank.
Overall, China accounted for 21% of the global retail market in 2019 and could replace the United States as number one next year. But that is far from guaranteed.
Even though Dragonomics has fired up the furnaces of global growth in the past, a second Covid-19 wave would certainly dampen the flames. All eyes will now switch to the outbreak in Beijing.
“Economic data is frightful right now – from retail sales to exports, growth engines are sputtering sharply,” Trinh D Nguyen, a senior economist at Natixis, a French corporate bank in Hong Kong, said last week.
During the last five mounts, the stats have been brutal with China’s economy shrinking by 6.8% in the first quarter, the first contraction on record.
In May, data published by the National Bureau of Statistics showed that retail sales in April dropped by 7.5% compared to the same period in 2019.
While the figures were grim, they were decidedly upbeat when measured against the 15.8% decline in March and the 20.6% fall in February during the height of the Wuhan epidemic.
On Monday, the release of last month’s numbers did offer a ray of hope amid the gloom, despite remaining in negative territory after tumbling by 2.8% year-on-year.
“In the first five months, the total retail sales of consumer goods reached 13.87 trillion yuan [$1.96 trillion], down by 13.5% [compared to the same period last year],” the National Bureau of Statistics reported.
Sluggish spending has certaintly failed to match improved industrial production data. Last month, the sector expanded by 4.4%, a rise on April’s 3.9%, which was the first increase in 2020.
“We believe that the unstable job market and healthcare concerns are the main factors slowing down the recovery. This means that even during the long holiday month of May, people were still spending carefully,” Iris Pang, the chief economist for Greater China at ING, the Dutch multinational bank, said in a note.
“So May‘s sharp drop in the contraction of retail sales could be a one-off from the Golden Week holiday. We need to keep an eye on June’s data to confirm whether the trend of spending really continues to improve,” she added.
Another curveball will be China’s urban unemployment rate.
Official data showed it was 6% in April compared to 5.9% in the previous month but down from the record high of 6.2% in February. May’s figure was 5.9% but that does not include at least 290 million migrant workers.
Unemployment is a notoriously sensitive subject to the upper echelons of the ruling Communist Party.
“The Covid-19 shock to the job market is unprecedented in its scale, length and nature,” Societe Generale economists Wei Yao and Michelle Lam wrote in a research report last month when they suggested that up to 10% of people officially employed in China could actually be out of work.
Premier Li Keqiang has made tackling unemployment a priority along with new technology infrastructure and domestic consumption.
At the National People’s Congress in May, he outlined plans to turbo-charge the economy during his annual state-of-the-union style speech.
“Given fiscal plans, infrastructure investment should continue to accelerate in the months ahead and push up growth in investment and industrial output. Services and consumption should benefit, too, as the construction boom will drive a rebound in high-paying migrant jobs,” Martin Rasmussen, of Capital Economics, a research consultancy, said.
For now, China’s consumers need the currency of confidence that the worst is finally over. So, they can “shop till they drop” again.