Source: China Daily

12-01-2008 16:14

Special Report:   Global Financial Crisis

A world speeding into recession can expect little solace from Chinese consumers, with the country's furniture stores, car showrooms and malls busier with window shoppers than buyers.

The long-awaited boom in Chinese consumption, which showed signs of unfolding earlier this year, now seems a more distant prospect as financial fears take root and people put off big purchases.

China has repeatedly vowed that it will help the global economy by maintaining strong domestic growth and recently launched a stimulus package with a headline price tag of 4 trillion yuan ($586 billion).

Although the plan was presented as a way of getting ordinary Chinese to spend more, any succor for world markets will come mainly from the very model that the government has tried to leave behind: big public spending on roads and railways.

"In the longer term, individual private spending is more important because it is more sustainable," says Wensheng Peng, an economist with Barclays Capital in Hong Kong.

"For the short term, the more effective way of stimulating domestic demand is still direct spending by the government on investment in infrastructure."

To be sure, Chinese consumption has appeared to hold up quite well despite a weakening economy. Annual growth in retail sales slowed to 22 percent in October from 23.2 percent in September.

But a breakdown of the data revealed sharp declines in many key categories. Spending on recreational goods was up 2.1 percent from October 2007, slowing from an 18 percent rise in the first nine months. Sales of mobile phones actually dropped 7 percent.

Everything connected to the slumping property market - furniture, home appliances and building materials - sold poorly.

Fan Qiang, a curtain salesman, sat next to piles of cloth in his Beijing store.

"This should be a busy time since the autumn is usually a season for home renovation, but no one is making money," he says. "Not losing money counts as a profit these days."