News ID: 262604
Published: 0929 GMT December 07, 2019

As China's economy slows, the poor take the brunt

As China's economy slows, the poor take the brunt

Several years ago, Gan Xiaoge traveled the nearly 200 kilometers (124 miles) from Anhui Province in China's east to the capital Beijing in search of work.

As an office cleaner, she rode the wave of the country's rapid economic growth and the opportunities it created, Aljazeera wrote.

But as that growth cools off, and the prices of key items rise rapidly, Gan finds herself among the hundreds of millions of Chinese who are starting to feel the pinch.

“The landlord has also raised my rent from 500 yuan ($71) to 800 yuan ($114), then 1,000 yuan ($142) in three months," Gan told Al Jazeera.

China's gross domestic product (GDP) — which measures the total value of all finished goods and services produced in an economy — grew by six percent in the three months leading up to September.

That was a relatively rapid growth rate for a country the size of China — an expansion rate that was more than three times that of the United States over the same period.

But it was the slowest growth China has experienced since 1992.

The slowdown is disproportionately hurting people like Gan —
 migrant workers and those in lower-income groups.

"There's no protection for us [from rent hikes] and [landlords] can always just find another tenant easily. The salary in Beijing is barely enough to earn a living," Gan said.

People in Gan's position are feeling the effects of the slowdown in various ways. One of them is through the job market.

China's official urban unemployment rate stood at 3.61 percent in the third quarter, according to a Ministry of Human Resources and Social Security official quoted by the state Xinhua news agency. It has hovered near or below the four percent mark for years, and that figure puts it roughly in line with the US unemployment rate.

But anecdotal evidence points to a growing number of manufacturing companies laying off staff as they suffer from the drop in overseas orders caused by the trade war with the US.

For instance, China's employed persons index — a component of the monthly official manufacturing purchasing managers' index that measures whether factory activity is expanding or contracting — slipped below 47 in August, the first time it had done so since the global financial crisis of 2007-2008. It recovered slightly to 47.3 in October, but any figure below 50 indicates that factories are cutting their headcounts.

But the Chinese economy had been slowing down even before the trade war began last year. One reason for the deceleration was Beijing's attempt to reduce debts and social inequality that had worsened as the government pursued an export-oriented strategy to create world-beating, low-cost industries.

Now, Chinese President Xi Jinping is trying to reverse some of those adverse side effects by reducing China's reliance on exports and making domestic consumers the main engine for growth.

Some analysts say that strategy has yet to bear fruit.

"Beijing is struggling to rebalance growth towards consumer spending, which suggests that any stimulus efforts will remain focused on investment," Diana Choyleva, chief economist at Enodo Economics, wrote in a research note.

"But ultimately, Xi Jinping seems prepared to accept much weaker growth. He cares more about reducing inequality and disarming its threat to [the Chinese Communist Party's] power than about growth and financial markets," Choyleva added.

But slowing growth is just one reason for the squeeze on people's incomes.

Overall, consumer prices rose three percent from a year earlier in September, the fastest increase in nearly six years, according to the National Bureau of Statistics.

The lives of Chinese people had started to become more pinched even before the trade war and the latest bout of inflation.

Chinese people have traditionally been among the most frugal, with savings rates far higher than those of citizens of most other countries. But from a peak in 2010, household savings as a percentage of disposable income has been on a slow, but steady, decline, according to the Organization for Economic Co-operation and Development. Savings has declined as the government has encouraged more domestic consumption to reduce China's reliance on exports.

Meanwhile, household debt has increased considerably over the same period. The International Monetary Fund (IMF) estimates that the total debt of Chinese households stood at 50.3 percent of GDP as of June 2018, above the emerging market average and 32 percentage points higher than it stood a decade earlier.

The IMF says the increase raises "concerns [about] whether further debt increases could lead to significant adverse effects on growth and financial stability".


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