On Thursday in Beijing, this correspondent walked into a suburban mall that sells Dior and Cartier products and saw the corridors lined with unsold export goods made for the US and Europe.
The mall’s luxury stores were empty but shoppers jostled for imitation jewellery that the corridor salesmen showed off as the latest fashion in Europe. Temporary stalls sold clocks, socks, frames, Mickey Mouse satchels, sewing machines and yoghurt-makers meant for Americans.
As China pours money into defying the economic crisis, railway and transport investment jumped 210 per cent in two months --- it hopes to strike eight per cent growth this year. But new figures of China’s shrinking foreign trade reveal that February exports from the world’s factory sank by 25.7 per cent, the worst plunge in over a decade and worse than anticipated.
Analysts at JP Morgan say the worst for Chinese exporters is yet to come. “If the global recession is more severe than expected and consumption cannot pick up solidly, China’s growth may come in below seven per cent,’’ said a J P Morgan report this month.
For the Chinese, eight signifies wealth, fortune, and a lucky wedding date. For Premier Wen Jiabao, eight per cent is the minimum growth needed to sustain the world’s largest developing economy this year. “As long as we adopt the right policies…and implement them effectively, we will be able to achieve this target,’’ Wen told China’s Parliament last week.
For the last five years, China outpaced this target and hit 13 per cent growth in 2007. But in 2008, growth dipped to a seven-year-low of nine per cent, and 6.8 per cent in the last quarter. Thousands of export factories shutdown. Twenty million migrants were laid-off. About 7.1 million graduates need jobs.
International forecasters don’t share Wen’s optimism. The World Bank has forecast a likely 19-year-low of 7.5 per cent growth for China this year.
This week, Tao Wang who heads China economic research at UBS Securities in Beijing, ‘reaffirmed’ her China forecast of 6.5 per cent GDP growth in 2009. UBS says that the government could be reiterating its eight per cent target to show its determination and ‘rally confidence’.
Investment in healthcare, education and social reforms will be crucial to make Chinese consumers spend more. Beijing cannot afford to wait too long for its policies to take effect.