Chinese consumers' confidence sags, casting a pall over the global economy

For years, no matter what was happening elsewhere, global companies bet billions upon billions of dollars that China’s consumers would keep spending money.

Now, just when the world economy could use their financial firepower, they are holding back, worried about the country’s slowing growth, a trade war with the United States and rising personal debt.

Zhao Zheng, 26, is among the cost-conscious consumers.

On Thursday, Zhao, a real estate agent, was browsing smartphones made by Xiaomi, a Chinese rival to Apple that prices its handsets at a fraction of what the American tech giant charges for iPhones. He said the success in China of Xiaomi and Miniso, a chain of low-cost variety stores, suggested that Chinese consumers were looking to get more for their money.

“The economy,” Zhao said, “is definitely very bad.”

A significant pullback could have a big impact on a world looking for engines of growth, on companies that counted on China’s continuing expansion and on global investors who have long viewed Chinese consumers as a steady source of profits.

Stock markets stumbled again on Thursday, in part over concerns that American companies and manufacturers are starting to feel the effects from the slowdown in China and the trade war. The S&P 500 sank 2.5 per cent, while shares of Apple dropped nearly 10 per cent after the company unexpectedly slashed its financial forecast, citing disappointing iPhones sales in the country.

The rise of the Chinese consumer is not over yet, and Apple’s disappointing numbers stem in part from the company’s own decisions. But the weakness at Apple followed reams of other data — declining car sales, faltering retail sales, a slumping property market, a tougher job market — that signal Chinese consumers may be losing their once unshakable confidence.

The sagging confidence could undermine China’s efforts to redirect its economy and spur growth.

The Chinese government hopes consumers will become a greater source of economic growth as the country’s longtime reliance on government-sponsored infrastructure projects and old-line industries like steel and cement pays ever-smaller dividends. In recent years, Beijing has rolled out a huge social safety net, tax breaks and other incentives to get people to spend more of their own money on the trappings of middle-class life.

The spending slowdown in China could be a worrying sign for many of America’s biggest companies, too, at a time when their profits and stock prices are under 

pressure.

©2018 The New York Times Service