Economic recovery in V or L?

Consumption of revenge
April waited for the rebound in consumption. A V-shaped recovery, like in 2003 after the SRAS episode.  The expression “revenge consumption -报复性消费” – is coming back. It describes consumer behavior after the Cultural Revolution, which had curbed consumer desires. A wave of compulsive buying had signaled the call for revenge. 

V in 2003 after the Sras
The Alibaba Group’s research centre does not believe in a V-shaped recovery, it even observe a trend towards savings, a sign that confidence has not yet returned. The economic crisis is not comparable to the one caused by the Sras, which mainly affected China. This time the world’s factory is affected by a global pandemic, foreign demand has weakened considerably. 

Croissance en V?

Only one V: Food
Of course, these difficulties do not make the headlines of Chinese newspapers who prefer positive energy – 正能量 (to use the government’s favourite expression). However, if you scour the Chinese media, you can find real testimonials that show the magnitude of the situation. The Sina Finance website mentions the example of Hisense, one of the world’s largest manufacturers of household appliances. 40% of its production goes abroad; information indicates major layoffs, up to 10,000 people. Haier, the other global giant in Qingdao, 50% of whose sales depend on international markets, is also struggling. The only sector that can boast a V-shaped recovery is the food sector. For Gao Hongbing, the group’s vice-president at Ali Baba, there are two reasons: “Eating is essential, unlike dressing and using. Second, the home delivery sector is highly developed and can replace canteens, it helps restaurants revive”. Restaurants have increased their take-away business which helps balance their accounts!

Incomes decline : no V
Declining revenues due to economic turmoil, layoffs, lower sales, and even lower salaries in some cases, are a drag on spending. Uncertainty would even encourage savings, a widespread practice in China. For the time being, the curve is closer to the L than the V. The two Assemblies starting next week in Beijing will certainly bring more direction in the economic measures to boost the economy.

Articles consulted :
武漢肺炎 精品業樂!中國文革後「報復式消費」有望重現

13 May 2020

Posted on Categories Economy

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