International worries as China's consumption and economy slows

20 January 2019, 23:05 | Updated: 21 January 2019, 09:31

Picture China's economy and you might be thinking of massive factories, gigantic airports or train stations built from scratch in 24 hours.

For another view, you could follow Xu Liqiang as he threads the streets of Beijing in a beaten-up tuk-tuk (motorised rickshaw).

Xu is 21 years old and a "kuaidi" (express delivery) driver. Each day 100 million packages are delivered in China and they're delivered by people like him. It's part of a boom in Chinese consumption that has driven growth in global GDP over the last decade.

But today, work is slow. "After Double Eleven [an online shopping festival], the packages have been getting less and less with time," he tells me.

Xu lives in a dormitory provided by his employer with three other kuaidi drivers. He moved to Beijing from Shanxi province in the north.

Migrants used to move to the capital and send money back to their families. Not any more. "Sometimes, I need my family to send me some money, to support my life here," says Xu.

The consumption boom appears to be fading. JD and Alibaba, home-grown internet giants similar to Amazon and eBay, have both reported disappointing sales figures.

But a drop in Chinese consumption isn't just China's problem, it's all of ours. Western companies have pinned their hopes on the 1.4 billion strong market. Recently, though, they've run into trouble.

Apple delivered a shock profit warning at the start of the year, blaming a lack of appetite among Chinese consumers for its newest models. And Jaguar Land Rover announced that 4,500 jobs in the UK would go largely because Chinese customers are buying fewer cars.

It looks gloomy across the entire economy. Last year GDP growth was slower than predicted, with official Chinese figures on Monday putting the figure at 6.6% - the weakest annual growth since 1990.

The Chinese stock markets was the worst performing of any major economy as the trade war with the US shook confidence.

That's not too much of a worry in itself - the stock market isn't a huge part of the Chinese economy (at least by Western standards) and foreign markets aren't that connected to it.

But the property market is also slowing - leading partly to that drop in consumption - manufacturing is contracting, and local governments are stuck with huge amounts of debt. Throw in the trade war with the US on top and you've got a tricky situation.

Now it seems to be affecting employment, too.

Tao Wei met me on his lunch break from an unpaid internship in Pudong, Shanghai. The 24-year-old goes to the Burger King in the shopping centre next door every day.

Unlike Xu, he's extremely well-educated, earning degrees in China and in the UK. But he's been looking for a job since he graduated from Sheffield University in 2017.

"It's a little bit hard compared with previous years because the overall economic situation is not very good and many companies, they don't want more people," he says.

But like many young people here, China's continued success is an article of faith.

"I trust China's economy will go up, up and up," he says enthusiastically, before he returns to the job search.

Others aren't so sure. Kobe Yang, a headhunter at J.H. Partners also based in Shanghai, says: "2018 was quite challenging and quite unprecedented.

"I think that 2019 may be even tougher but the situation might be a little bit complicated because it really also depends on the negotiations with the trade war as well, but I think for the next few years the situation won't be improved and will still be very challenging.

"We have a very high debt ratio and actually we need some structural reform to improve the quality of the GDP."

The next two years, Yang says, are all about "survival".

Many, though, have called time on the Chinese economy before. It hasn't happened yet.

The Chinese Communist Party will go to almost any length to protect the economy, aware that much of its legitimacy as a regime derives from China's development. It's already announced measures to stimulate consumer demand and to loosen monetary policy.

It's not just the CCP who will be looking on nervously. What happens in China matters to the whole world, more than it ever has before.