Highlights from my trip to China – Part 2 – The financial crisis and China

Despite censorship and propaganda, Chinese people are very aware of what is going on in their country and around the world.  Every person I met knew of the financial crisis in America, and even the masseuses knew of Obama and McCain. I’m fairly sure most people here in America have no idea who the Chinese president is. (Funnily enough the Chinese president’s last name is “Hu”).   Here are some of the tidbits I heard about how the financial crisis and other factors are affecting China’s economy and the lives of everyday folks.

First of all, the stock market in China plunged more than 70% from its highs.  The central government called this a correction, but the people I talked are pretty aware that it’s more than that. However, the percentage of people in China with skin in the stock market is very small.  Most people put their money in the four large government capitalized banks and collect interest and many people still have traditional pensions for their retirements. However, orders for Chinese goods are down significantly for next year and many factories are closing down due to lack of sales since the United States is China’s largest trading partner.  Everything from shoes and plastic forks are seeing decreases in orders.  Unemployment is fairly high since China has way too many people.

Another event that affected China’s economy is the Olympics.  In order to ensure that the event was a success with the least amount of restrictions China created new Visa rules to curtail the entry of foreigners.  As a result, the amount of tourists dropped by quite a bit.  Most of these Visa restrictions have been lifted, but the outlook for tourism is still lower than previous years because many foreigners are not travelling in the current economic climate.

The people I spoke to were also quite curious about home and car purchase in America.  Cars carry a tariff as high as 25% to 100% in China, but people still buy them.  Condos in large cities like Beijing and Shanghai are extremely expensive, and yet people still manage to pay in cash or put at least 30% down. The tour guide in Shanghai told us that most people also get very short term mortgages where they pay a home off in 5 years.  She thought that a 0% down loan is absolutely ridiculous and said that the bankers in America must be idiots. Home prices in China hasn’t really fallen because people save up so much cash to buy something, but home sales have slowed significantly after a rapid run in prices.

Most people I spoke to believe that the Chinese government is doing the best it can under the current economic climate.  Everyone agreed that their lives have vastly improved in the last two decades of reform, and even though some people said that they were dubious about China’s large purchase of American government debt, they seem to agree with the fairly conservative economic policies of the central government.  China is also focusing on education and scientific research much more than before to cultivate its own engineering and scientific talent.  Another emerging trend is that more and more Chinese students of my generation who go abroad are returning to China after they graduate.  This is a big difference from my parents’ generation, who went abroad and never returned.

For the most part,it seemed like business as usual in China. In my hometown, the restaurants we went to were packed to the brim and my grandfather said, “I bet you can’t see a financial crisis here.”  There weren’t as many tourists, but I guess that’s better for pictures.  In Shanghai it was hard to hail a cab, and car license plates are auctioned off each month for more than $5000 each.  In Beijing, the construction cranes were still working overtime to erect modern and bizarre skyscrapers.  China is definitely still growing amidst this global financial turmoil, and there is definitely a sense of pride and optimism in the misty polluted air.

To be continued…

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