The persuasive power of China鈥檚 consumers
As the Chinese economy faces a downward spiral in prices, leaders try to convince consumers to spend, shifting power from the ruling party to citizens.
As the Chinese economy faces a downward spiral in prices, leaders try to convince consumers to spend, shifting power from the ruling party to citizens.
The world鈥檚 largest shopping event, Singles鈥� Day, was again held Nov. 11 in China 鈥� though the online bargains began weeks earlier, as is the case with Black Friday sales in other parts of the world. This year, however, the event was not just a commercial gala.
China鈥檚 annual shopping spree, which began in 2009 in earnest, no longer focuses on singles. (The date 11.11 resembles 鈥渂are sticks鈥� in Chinese, an idiom for being unhitched.) The unofficial holiday of mass consumption is now a key economic indicator: Whether or not the world鈥檚 second-largest economy will fall into a downward spiral of falling prices, or deflation.
Early reports from China鈥檚 giant e-commerce firms suggest spending for Singles鈥� Day was not enough to trigger a rise in retail prices and thus help end more than two years of declining prices. Sales were up 18%, but they were just over half the nearly 27% rise last year.
That may disappoint the Chinese Communist Party. In September, it vowed to 鈥渧igorously boost consumption,鈥� which would be quite a policy shift after decades of the party focusing on state investments in industries to help China become a global power. Prices of everyday goods have plunged, according to a Bloomberg News survey, while the share of loss-making companies is at a 25-year high.
The party has had some success in curbing one cause of falling prices. With its immense power over private companies, it has begun to reduce a state-driven overcapacity in industrial goods that has led to cut-throat competition in prices. But other fundamentals will be more difficult to reverse in order to achieve a healthy inflation rate.
鈥淗ouseholds have poor expectations for the future because homes are losing value,鈥� former Finance Minister Lou Jiwei said during a speech Nov. 14. 鈥淭his will drag on the growth of consumption and amplify the deflation trend.鈥�
The party might be reluctant to appeal to 1.4 billion Chinese people to get out and shop. Having to persuade consumers to spend more money on goods, especially with high youth unemployment, might shift power to citizens.
The party prefers people listen to it rather than it listening to the people. In China, however, when consumers sit on their hands, it is as good as voting on the party鈥檚 record as commander of the economy. Consumer power does not easily translate into democratic power. But using the freedom to shop 鈥� or not to shop 鈥� at least is a tip toward democracy.