China: Consumption downgrade continues to reflect deepening economic crisis

Margaret (China Labor Forum) 5 July 2024

Compared with four years ago, the consumption expenditure of ordinary urban residents in China has dropped sharply by 40% - this is an important manifestation of China's current trend of consumption downgrade. Given that private consumption in China is lower than in all other large economies, such a decline portends a deep crisis.

From the changes in the consumption amount and consumption habits of the general public, we can see that the situation of consumption downgrade has not been reversed. During this year's China e-commerce "618 Shopping Festival", the total merchandise transaction volume on China's major online platforms decreased by 7% compared with the same period last year. In the past few years, even with the COVID-19 epidemic, the sales of the 618 Shopping Festival have increased year after year. During this year’s May Day holiday, although the number of people traveling reached a record 295 million, per capita consumption was more than 10% lower than in 2019.

618 Shopping Festival
Although some commentators mentioned that China's total retail sales of consumer goods in May increased by 3.7% compared with the same period last year, which was higher than market expectations, this was largely due to the early start of sales during the "618 Shopping Festival", as well as the May Day holiday and The trade-in policy for home appliances has been boosted.

The ongoing economic downturn is the factor behind the downgrade in consumption. Official data shows that the economy will grow by 5.2% in 2023, but many economists estimate that the actual growth rate is at most 2%; and for young people who are unemployed after graduation, workers whose income has dropped, and property owners who have experienced depreciation of real estate, it feels like the economy is growing. decline, and pessimism among the masses intensified. Personal income tax fell by 7% in the first four months of this year compared to the same period last year. Considering that the threshold for personal income tax has not been raised, this means that because many people are also facing salary cuts, the overall income level of the people has dropped. In the first five months of this year, Chinese household deposits surged by RMB 7.13 trillion. The growth rate is quite astonishing, which shows that the general public is holding on to the currency and waiting.

The Chinese Communist dictatorship has taken no measures to deal with the current situation of consumption downgrade. The increasing living burden of the general public, stagnant wages, high unemployment, and rising medical, education and housing costs are all the reasons behind this. Although it still claims to be "socialist" and "Marxist", it has neither the will nor the ability to establish a more complete pension system, medical insurance system and expand more popular public services to establish a social safety net and reallocate resources. to consumers, reducing household precautionary savings. In May 2022, Xi Jinping clearly opposed "welfarism" in the CCP publication "Qiushi", saying that "high welfare has raised a group of 'lazy people' and those who get something for nothing." His argument is exactly the same as that of Western right-wing politicians and supporters of free market economy. ——Not only because of the CCP’s current pro-capitalist, right-wing true ideology, but also the financial crisis that China’s capitalism has entered is also a major factor.

The debt of China's local governments has accumulated as high as 94 trillion yuan, and the decline in land transfer revenue has worsened the local fiscal crisis. However, due to the real estate crash, land sales revenue in the first five months of this year dropped by 14% annually, and land revenue has always been one of the important sources of revenue for Chinese local governments. Even if there are special treasury bonds issued by the central government to "borrow new ones to repay old ones," the amount is far from enough to cover local debts. At most, the bond redemption period will be extended to avoid local debt explosions.

The Chinese Communist regime is focused on increasing output, competing for leadership in emerging industries such as electric vehicles and photovoltaics, both of which are also closely related to Xi Jinping's new term " "New quality productivity" and "high-quality development" echo. However, disorderly competition under the capitalist market economy, coupled with insufficient domestic and foreign demand, encountering sharply increased tariffs and other factors, have caused various problems. For example, there are more than one million new energy vehicle-related companies in China, but there is overcapacity and the utilization rate is only 57%. Various car companies are engaging in price wars in order to compete for the market, and most of them are losing money and going bankrupt. Similarly, China's annual production capacity of finished solar modules is more than twice the global module installations, and industry prices have also plummeted. These conditions ultimately further hit mass employment and income, and coupled with the intensification of deflation (falling prices), the motivation for consumption is further dampened.

Third Plenary Session of the CPC Central Committee
The Third Plenary Session of the 20th CPC Central Committee was postponed from last autumn to mid-July this year . In addition to the intensification of internal power struggles, it is more likely because the CCP does not have any new economic policies to launch. At a time when finances are tight and officials are unwilling to launch a large-scale stimulus package, the economic policies that are likely to be involved in the Third Plenum of the Central Committee of the Communist Party of China, including delayed retirement, fiscal reforms, new tax systems, etc., will ultimately make the workers pay the maximum price and further suppress purchasing power and Resident consumption. The working class needs to fight for rising wages and radical improvements in social welfare as the only way to stop the current downward spiral of living standards. But to do this, it is necessary to organize independent trade unions and mobilize workers' struggles, and consumers also need to establish price control committees. In China, truly independent organizing means challenging the CCP dictatorship and capitalism, and this process must have the democratic organization of the workers and a militant, socialist program.


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