While China’s wealthier citizens have so far emerged largely unscathed financially from the pandemic, many on low incomes are struggling, reported the Financial Times.
The uneven recovery in consumer spending has raised questions from low-income workers to economists and analysts about the way the Chinese government has responded to the pandemic. While many countries have tried to directly transfer cash to consumers to protect businesses, Beijing has focused much of its effort on stimulating investment and construction.
Even though the IMF forecasts growth of 1.2% for China in 2020 and above 5% a year between 2021 and 2025 — well ahead of any other major economy — some question whether that return to growth will benefit those lower income consumers that Beijing needs to start spending. Domestic consumption — which accounted for 57.8% of growth in gross domestic product in 2019 — had become a significant factor for the world’s second-largest economy even before China’s trade war with the US darkened the outlook for exports.
“Government policy has failed to narrow the rich-and-poor gap that widened following the virus outbreak,” says Wang Jun, a researcher at the China Center for International Economic Exchanges, a government think-tank. “This will put a lid on overall consumption recovery as the low-income population far outnumber high-income ones.”