China Can’t Boost Consumer Confidence

Welcome to Foreign Policy’s China Brief.

The highlights this week: China announces further fiscal stimulus measures but still struggles with consumer confidence, Washington’s National Zoo gets a new set of pandas on loan from Beijing, and China’s military exercises around Taiwan draw online reaction.

Beijing Announces More Stimulus Measures

Chinese authorities announced more fiscal stimulus measures over the weekend, promising—in rather unspecific terms—more policies to support local governments mired in debt and to help them buy land and assets from developers amid China’s property crisis. The news didn’t do much to boost markets, despite official messaging that the central government is confident and in control.

However, a widely publicized Caixin article suggesting that Beijing may issue 6 trillion yuan (around $850 billion) in bonds over the next three years gave a burst of confidence to investors. That was enough to get Goldman Sachs to raise its estimates of China’s GDP growth this year by a little—though the investment bank is still predicting that the country will miss its 5 percent target.

Many investors have still been hoping for stimulus measures similar in scale to those that the Chinese government pursued from 2008 to 2009, when it promised $586 million—or around 7 percent of China’s GDP—in annual investment. Today, that would mean around $1.2 trillion a year. That might yet come, but it will be difficult to get welfare-adverse Chinese President Xi Jinping to acknowledge the need.

And even then, it might not be enough. With credit demand shrinking, China needs greater household consumption to support economic growth.

Although Chinese consumption was growing by around 8 percent a year until 2022, it has always been low by global standards: Even higher estimates of household consumption put it far below the world average of 63 percent of GDP. Today, despite the official government position calling for a change to a consumption-led economy, it is still barely growing.

In 2008, the immediate impact of the global financial crisis was only visible among foreign firms in Beijing, which rapidly cut back on spending. Much of the Chinese public barely noticed the domestic impact—and why should they have? China’s GDP growth that year was 9.6 percent, down from 13 percent the year before but still booming. Government economists were fretting—hence the big stimulus package—but the public was not.

Back then, Beijing only had to keep the party going. But now, it’s 3 a.m. and everyone has gone home. Consumer confidence numbers are revealing here. Like a lot of polling in China, the trend is more useful than the absolute figure, given nonresponse rates and pressure to give positive answers. But in 2008, consumer confidence dipped by 12 points. In April 2022, when the Shanghai COVID-19 lockdown started, it fell by 45 points.

Consumer confidence has stayed at around the same level since. It speaks to the strange mix of political sentiment and material reality that makes up Chinese economic environment and suggests why it may be so hard for the government to get it moving again, however much money it throws at the problem.

At the start of 2022, Chinese consumer confidence was at a high point despite the considerable economic problems caused by the COVID-19 pandemic. GDP growth for 2020 had reached only 2.2 percent, and China’s financial aid to households was far below its Western counterparts, but there was still confidence in the future. China, the public believed, had controlled the pandemic while the rest of the world had failed.

The continued lockdowns that year, followed by the abandonment of China’s zero-COVID policy and consequential wave of deaths, caused a disillusionment that still lingers. It’s hard to directly ask people about their confidence in Xi and the party’s leadership, but it seems to have fallen along with consumer confidence. (One sign of this skepticism about a prosperous future is China’s total fertility rate, which fell from 1.5 children per woman in 2019 to just 1.0 children per woman  in 2023.)

That’s not something that money alone can fix; it may be something that a change in political leadership could.

What We’re Following

Pandas return to Washington. The gradual return of the U.S.-China relationship to semi-normality brought pandas back to the National Zoo in Washington, D.C., on Tuesday after the departure of one pair last year. All giant pandas in foreign zoos are technically loaned by China as part of long-running diplomacy efforts that began in the 1950s. The withdrawal of Washington’s pandas, whose loan had been extended for more than a decade, was a sign of how bad ties had gotten.

But as the New York Times reports, there is another angle. China’s breeding program has involved practices that many zoos would consider animal abuse; furthermore, attempts to return animals to the wild have largely failed. That is a contrast with successful programs for other iconic national animals, such as the gray wolf and bald eagle in the United States or the golden lion tamarin in Brazil.

Taiwan reacts to Chinese exercises. China went ahead with an expected round of military exercises around Taiwan following the island’s National Day celebrations on Oct. 10. Beijing’s rhetoric around the day was typically aggressive, but the drills were relatively short compared to last year, although they saw the deployment of a record number of aircraft.

An odd bit of propaganda depicting the route of the drills as drawing a heart around Taiwan and claiming it was “in the shape of loving you” drew contemptuous replies from Taiwanese people, who compared it to the actions of a stalker. Chinese propaganda directed against the Taiwanese public is often a largely ineffective mixture of threats and wooing.

Tech and Business

Forest corruption. A Chinese state-owned lumber giant is under investigation, reportedly for rampant corruption and being on the brink of financial collapse. China Forestry, formed in 1984 in a merger of nine previous state-run forest management groups, was taken over by another state-owned group in 2023 after running up around 156 billion yuan ($21.9 billion) in debt. Its former chairman is now facing bribery charges.

Another entity called China Forestry, this one a private company, was charged with fraud in Hong Kong in 2018. China has seen severe deforestation since 1949, initially encouraged by the Chinese Communist Party as part of modernization. Despite a new emphasis on reforestation, the country’s forests continue to shrink, with about 7 percent of tree cover lost since 2000.

Chinese timber companies are also implicated in the black market worldwide, with the country now the largest market for illegal logging, according to the U.K.-based Environmental Investigation Agency. The cost of global timber corruption is estimated at around $29 billion a year.

Space science plan. On Tuesday, the Chinese Academy of Sciences announced a plan to use the country’s ambitious space program to become a global scientific leader in space science. The proposal, originally sketched out in a paper published in September, focuses on both practical science such biological experimentation in space and tricky questions of theoretical physics, where China is seeking to become a pioneer.

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A Bit of Culture

Zhiguai, literally “anomaly accounts,” are a form of writing with more than 2,000 years of history. Sometimes these short records can be useful as fragmentary evidence of regional traditions and beliefs that would otherwise not have made it into the literary record. Other times, as in this short account from the Records of Things Seen and Unseen, attributed to Liu Yiqing (403-444), the stories can be better read as pure entertainment.—Brendan O’Kane

Excerpt from Records of Things Seen and Unseen

Ruan Deru saw a ghost in the privy once.

The ghost was more than 10 feet tall, dark and big-eyed. It wore white graveclothes and the high sloping cap of an official, and it was just inches away from him.

Keeping his cool, Deru smiled at it. “People say ghosts are hideous,” he said. “They’re not wrong.”

The ghost fled, blushing furiously.