Retail

Can The US Follow China’s COVID Comeback?

China retail shop

The Chinese retail economy is on the comeback trail, lending optimism to the thinking that the U.S. can follow its model if the pandemic is brought under control.

Earlier this week the Chinese National Bureau of Statistics announced that August retail sales rose for the first time this year by 0.5 percent from 2019, while industrial production expanded 5.6 percent against a forecast of 5.1 percent. That’s stacked up against the first eight months of the year when retail sales slid 8.6 percent and industrial production advanced 0.4 percent. Industrial production is often seen as a sign of the beginnings of consumer demand.

“The data show the world’s second-largest economy in recovery from the first-quarter slump, in stark contrast to nations still struggling with virus outbreaks, lockdowns and economic contraction,” says Bloomberg. “In China, fiscal stimulus and surprisingly strong exports first boosted industrial output. Now, the return to growth in retail spending shows private demand is also starting to claw back losses earlier in the year.”

The Chinese experience has featured different strategies against the coronavirus as well as the economic fallout from it. The country launched massive testing and tracing schemes and didn’t hesitate to lock down entire cities, especially Wuhan, where the outbreak started. China also built two hospitals in one week in Wuhan to treat COVID-19 patients.

From an economic perspective China waited until relatively late (May 28) to announce a stimulus plan. Even then, it opted for cost-cutting moves that would affect consumer pocketbooks rather than straight fiscal contributions as the U.S. did. The May 28 package contributed 4 trillion yuan (about $559 billion in U.S. dollars) in cost-saving measures to factories and retailers. The cuts included tax exemptions, lower bank interest rates and reduced prices for utilities.

The Chinese government was cautiously optimistic about the recovery.

“Regarding the situation in the second half of the year, there are indeed some risk factors,” Fu Linghui, a spokesman for the National Bureau of Statistics (NBS), said at a press conference earlier in the week. “Internationally, the recovery of the world economy as a whole is still relatively difficult. In particular, the spread of the pandemic has not been effectively contained … and the external economy is still unstable and uncertain. Domestically, during the economic recovery, some industries and companies are still experiencing difficulties, and there is an uneven recovery.”

Yet retail is the surest sign that consumers have money to spend and the confidence to spend it. The news was a positive sign for many U.S. analysts.

“I think we’re going to have a V shaped recession with a swift recovery,” said Seeking Alpha’s Tim Worstall. “It’s going to be the last few percentage points which will be the difficulty as we re-engineer things to cope with social distancing. The predictions of immense and total doom will, I think, prove to be wrong. My beliefs about this are rather based upon my prejudices about market economies of course. But as the China example shows it is indeed possible for this to happen. And given that China’s still the only example we’ve got so far of a country that has been through the whole lockdown and open up again cycle our empirical evidence is currently 100 percent on my side.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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