BEIJING (AP) — Yu Mingang had a good job helping Chinese manufacturers prepare to sell shares to the public until the cooling economy derailed those plans.
As demand for auditing services sank, the 25-year-old accountant in the eastern city of Hangzhou was laid off in December. Yu tightened his belt:
No more movies or eating out. He put off buying a computer.
“I pay rent out of my savings,” Yu said.
The downturn is squeezing urban workers and entrepreneurs the ruling Communist Party is counting on to help transform China from a low-wage factory into a prosperous consumer market.
Headline economic numbers still look healthy. Growth in 2019 is forecast at more than six per cent, down only slightly from about 6.5 per cent last year. But it is propped up by higher government spending, which masks sharp declines in other areas. Those are spooking the public and discouraging spending, which could make the downturn worse. A tariff war with Washington over Beijing’s technology ambitions is adding to anxiety over job losses and tumbling sales of cars, real estate and consumer goods.
“I am worried about my job security and have cut spending on everything including clothes, vacations and changing smartphones,” said He Siying, who works for an investment consulting firm in Beijing. He, 32, was rattled when friends were laid off. One found a new job but the employer wanted her to work six days a week. “I really dare not spend much,” said He, who has a one-year-old son. That anxiety is hitting China’s trading partners and global companies that increasingly count on Chinese consumers.
Apple Inc, General Motors Co, jeweller Tiffany & Co and others say sales are down. Auto purchases shrank in 2018 for the first time in three decades. Japan and South Korea report lower exports of components for smartphones and other electronics sold in China. The decline in economic growth that peaked above 14 per cent in 2007 is partly intentional. Regulators clamped down on lending in late 2017 to cool a debt boom. But the downturn was sharper than expected.
The private sector has been hit hard.
“Many people have been laid off. People are having a hard time finding a new job and are panicking,” said Summer Li, a 28-year-old product manager for an electronics company.
Yu, the Hangzhou accountant, said he lost his 100,000-yuan-a-year (USD14,000-a-year) job after demand for auditing services fell by one-third. Clients put off plans for stock market listings after profits sank below the level required by regulators.
“It happened due to the bad economic situation,” he said. The ruling party promised in 2013 to support entrepreneurs who create China’s new jobs and wealth. But reform advocates complain President Xi Jinping’s government has instead focussed on expanding state-owned companies that dominate oil, banking and other industries.
Jolted by the deepening slump, Xi and other leaders have pledged to help private business by cutting taxes and regulation.
Premier Li Keqiang, the top economic official, met with bankers in December and told them to make 30 per cent of new loans to private business, state media reported. The central bank announced a 100 billion yuan (USD14 billion) loan fund on December 19 for small companies.
Exports to the United States (US) held up through late 2018 despite President Donald Trump’s tariff hikes. But sales shrank 3.5 per cent in December compared with a year earlier as those penalties started to hurt demand. Jittery companies and consumers already were putting off investments and big purchases. “Consumer confidence is weaker and uncertainty has increased. The US-China trade war is feeding into that,” said Chief Asia-Pacific Economist for IHS Markit Rajiv Biswas. “That is obviously a risk to the growth outlook for 2019.”