China says its own consumers will save the day but they re not buying

BEIJING – As the United States and China barrelled head first into full-fledged trade war this week, one of Beijing’s most fashionable shopping districts was still bustling. People browsed a high-end perfumery, lounged outside coffee shops and waited in a wrap-around line for a trendy bakery.

That is just the type of scene the Chinese government wants to see as it steels for what could be a total breakdown of trade with the US.

As President Donald Trump maintains tariffs of at least 125 per cent on its goods, China has vowed not to back down. Besides hitting back with its own tariffs – 84 per cent on all imports from the US – the government has promised to make up for the blow to exports, on which China’s economy currently relies, by getting its people to spend more.

“In the face of high tariffs continuing to shrink the space for trade with the United States,” read a commentary on April 6 in People’s Daily, the Communist Party of Party mouthpiece, China will “make consumption the main driving force and ballast stone of economic growth, and deliver on the advantages of a super-large market”.

But that is easier said than done.

Domestic consumption in China was anaemic even before the tariffs. The post-pandemic economic recovery has been lacklustre, factories have shuttered, and youth unemployment is high. Home prices, the bedrock of many middle-class Chinese families’ wealth, have plummeted.

Even the busy scene at the Beijing shopping area, Taikoo Li, was deceptive. When Chinese people do go out, they increasingly tend to look for bargains or simply browse.

Mr Qu Nan, 38, the founder of a construction company, was sitting at a Starbucks in Taikoo Li. But he was not drinking anything, just meeting a friend.

Before the Covid-19 pandemic,