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As the rest of the world limps along, China’s economy is surging

“For a lot of extremely expensive jewellery, they were out of stock,” he said.

The Chinese economy shrank in the first quarter, its first contraction of the modern era, but now has resumed its surging ways. The nation’s factories are once again churning out goods for the world. Plentiful government lending is fuelling big construction projects. Chinese officials are expected to report next month that growth accelerated during the July-to-September quarter, even while the rest of the world limps along.

The recovery in spending started with the affluent after coronavirus lockdowns last spring and has begun spreading to middle-class families, but many low-income workers are still struggling. Retail sales grew 0.5 per cent last month compared with a year earlier, the first increase this year. Xibei, a national chain of mid-priced restaurants that were mostly empty last spring, said that its sales from September 18 through 24 were up 4.5 per cent compared with the same days last year.

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China’s wealthy are willing to shop. Restaurants, hotels and airports are crowded again. Business hotels in Beijing have nearly doubled room rates by eliminating pandemic discounts and filled up anyway. Nearly all international travel is still suspended, but big airports in cities like Guangzhou and Chongqing have almost as many domestic travellers as last year.

Spending by customers like Cao has lifted sales for luxury carmakers like Porsche, which has even flown electric Porsche Taycans from Germany for sale, and NIO, a Chinese electric car competitor to Tesla. “Life continues without any big impact from the pandemic,” said William Li, NIO’s founder and chief executive.

A big question, when China’s middle class would join in, seems also to have been answered. Sales of large and luxury cars recovered swiftly in April, but compact car sales stayed weak through much of the spring and summer despite heavy price discounting by automakers. Now they have almost caught up to last year’s pace. Public concerns about catching the virus on mass transit helped car sales in the spring, but sales have stayed strong in recent weeks even as those concerns faded.

“The cheaper vehicles are coming back,” said Yale Zhang, the managing director of Automotive Foresight, a Shanghai consulting firm.

Edward Cai, a 26-year-old Beijing consultant, spent little in the spring. Now he is going to movies — he liked a just-released remake of The Invisible Guest but not Mulan, the China-centric epic from Disney. He even splurged on a vacation a month ago to southernmost China.

“Much of my spending was put on hold during the epidemic,” he said, “but it’s coming back.”

Not all of China’s spenders can say the same. Many low-income workers and recent college graduates have not yet found new jobs after coronavirus lockdowns or are labouring at reduced hours with lower pay. Businesses and consumers in many inland cities are struggling.

“The richest regions are outperforming across the board,” particularly export regions along the coast, while the rest of the country lags, said Derek Scissors, the chief economist of the China Beige Book economic analysis.

The crowds were out in force at the Beijing Auto Show.

The crowds were out in force at the Beijing Auto Show. Credit:Getty Images

It helps that China has tamed the coronavirus within its borders. By contrast, European nations are closing bars and restaurants in response to an autumn wave of infections. In the United States, layoffs remain widespread and many businesses have closed.

The Beijing auto show, held every other year in alternation with the Shanghai auto show, has proved a fairly good lens through the years for focusing the strengths and weaknesses of the Chinese economy. It has become more and more dominated by luxury brands, by vehicles tailored to Chinese tastes and by increasingly sophisticated Chinese manufacturers with ambitions of creating global brands.

The show has also showcased China’s transformation from a technological laggard to the world’s largest market for electric cars, which customers have been snapping up in recent months. Ford unveiled on Saturday a Chinese version of its new electric Mustang. NIO announced an upgrade to the self-driving software on its electric cars to allow them to merge with highway traffic and exit by themselves.

Polestar, a joint venture of Volvo Cars and its Chinese parent, Zhejiang Geely, announced plans for mass manufacture of electric cars next year in Chengdu, China. Thomas Ingenlath, Polestar’s chief executive, said the company was building a factory that it intends to run only on renewable energy.

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Ingenlath was one of a handful of top auto executives who flew to China for the show. Just released from the hotel where he served two weeks in isolation after his arrival, he expressed amazement at the differences in daily life between China and Europe because of China’s unusual success in suppressing the coronavirus.

“In Europe, you would very much avoid handshaking, even though it is the home of the handshake — I’m surprised it is not an issue here,” he said. “People are less worried.”

Liu Xiaozhi, a former car engineer who now serves on corporate boards, said that the country’s success against the coronavirus had allowed consumers to resume spending money freely once again.

“In China,” she said, “it is actually quite back to the way it was before.”

The New York Times

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