Impressions from the Chinese Recession
I meant to post something after my departure from China a few weeks ago.
I certainly had the impression that the streets are quieter, the shoppers less active and the single young men less bold in their quest for female company - just a little more somber than before. American buyers canceled orders almost overnight late last year when the recession hit, and thousands of Chinese factories have closed. Those that haven't closed have down-sized, often by 50%. All of this is evident in the general atmosphere both in China and Hong Kong, where the luxury stores in Central have only the over-staffed salepeople staring at one another or SMS-ing to pass the time with not a customer in sight. Towering over the financial district, a skyscraper with a huge flat-screen sign flashed out 3 letters of harsh reality to the financial workers in the streets - A.I.G.
But there's a difference between China and the West in some of the fundamentals.
As I was leaving China, an associate pointed out a complex of high-rise luxury apartments. "My friend lives there", he told me proudly. "They cost RMB1,000,000 (about US$150,000)."
"Did he borrow the money from a bank?" I asked, wondering how mortages work in China.
"No, his parents lent him the money. Chinese tradition to provide savings for childrent to buy a home" he answered firmly.
Of course I don't think this is the rule, but it's an indicator of the upwardly mobile Chinese middle/upper-middle class.
I stared at the buildings as we passed, thankful that the man's parents had saved up money. It's people like that who are also creating the reserves to pay for our stimulus at home.
PS. If you're interested in a good read of the recession in China, look for James Fallows' article in the April Atlantic Monthly on the subject. His bottom line - China is down, but it's no Japan and this is just a respite from long-term growth.
PPS. WSJ reports that China is spending US$120-billion in the next couple of years as a healthcare stimulus. They're planning to build clinics in every village in China! Wow - that's a lot of stethoscopes.