The Financial Times' detailed article "Why China's Coronavirus Recovery Is Widening the Wealth Gap" (https://www.ft.com/content/e0e2940a-17cb-40ed-8d27-3722c9349a5d) highlights China's unbalanced two-speed recovery. While the nation’s wealthier citizens have so far emerged largely unscathed financially from the pandemic, many on low incomes are struggling. The uneven recovery in consumer spending has raised questions from low-income workers to economists and analysts about the way the Chinese government has responded to the pandemic.
So, although the IMF forecasts growth of 1.2 per cent for China in 2020 and above 5 per cent a year between 2021 and 2025 — well ahead of any other major economy — some question whether that return to growth will benefit those lower income consumers that Beijing needs to start spending.
Domestic consumption — which accounted for 57.8 per cent of growth in gross domestic product in 2019 — had become a significant factor for the world’s second-largest economy even before China’s trade war with the US darkened the outlook for exports.
“Government policy has failed to narrow the rich-and-poor gap that widened following the virus outbreak,” says Wang Jun, a researcher at the China Center for International Economic Exchanges, a government think-tank. “This will put a lid on overall consumption recovery as the low-income population far outnumber high-income ones.”
The fall in spending is especially pronounced at the bottom of the ladder. A study by Shen Jianguang, chief economist at JD Digits, a Beijing-based fintech group, shows per capita online spending by low and lower-middle income households declined in the first half of this year even as overall ecommerce revenue picked up. He estimates that unemployment among low to middle-income adults is more than twice the national average of 5.7 per cent. “Poor people are bearing the brunt of the economic downturn,” Mr Shen said in an interview with FT.