HONG KONG—One thing is missing from China’s otherwise remarkable economic recovery: a strong rebound in consumer spending.
Even though China was the only major economy to expand during the Covid-19 pandemic last year, its growth remains highly unbalanced, relying heavily on exports of manufactured goods to the U.S. and elsewhere. Domestic consumption has lagged, with retail sales shrinking 3.9% in 2020 from the previous year and demand for imported goods falling slightly.
There are many reasons for the weakness. While China’s unemployment rate never shot up as much as unemployment did in the U.S. and Europe, many employers cut salaries or hours, leaving consumers anxious. Many opted to save more—a common tendency in China, which has long had a high savings rate.
China’s government also didn’t hand out checks to consumers as the U.S. did, choosing instead to focus stimulus on helping factories and other businesses.
Many economists now believe spending weakness will persist in 2021. If it does, it could mean Chinese demand does less than hoped to help lift other economies out of trouble this year.
