The new year has begun with renewed talk from Beijing of boosting consumption—that is, getting people to buy stuff—but all signs appear to be heading the other way. The latest news, for example, includes a continuation of the property sector slump with January sales figures from the 100 largest developers down 27% from a year earlier (a contraction of RMB 165.5 billion), while Vanke lost RMB 82 billion last year (a more than 65% bigger loss than last year).
The property sector is the main store of wealth for Chinese families and problems there cast a shadow over everything else. BYD share price fell to their lowest levels in a year due to a decline in EV sales after subsidies were cutback. At the same time, tech companies are fighting a fierce battle to win consumers over to their platforms by subsidizing their own products, with Alibaba committing a record RMB 3 billion to promote sales on its AI platform Qwen over the Lunar New Year period. As the BYD share price shows, subsidies are effective as a temporary Band-Aid, but do not solve the long-term issue.
Ironically, in the latest news the only silver lining is the silver economy—that is, old people. China’s largest private education company, New Oriental, announced that it is pivoting to providing education services to the elderly. Relying on 80-year-olds going back to school, however, is not necessarily a healthy way to build a long-term economy.