IS AN AFTERNOON OFF FOR ALL THE SOLUTION TO CHINA’S GROWTH-RATE SLOWDOWN PROBLEM?
By Kobika Mohan
In Hebei, a province in the far north of China, a new scheme has been tested out as a response to the slowing rate of economic growth. The scheme represents a change in the Chinese economy, and is a signal of what is to come for China in the future.
Governments the world over have been anticipating this slowdown of Chinese economic growth following its rapid factory-fuelled boom. In the most recent quarter, rates of growth slowed to levels not seen since the financial crisis, coming in at 6.5% in early October of 2018. To put this into perspective, though, this rate is almost three times that of the American rate from the same quarter (2.5%). Despite this, growth rates for the preceding 3 quarters were consistently over-estimated and failed to be met by the Chinese economy at large, which suggests that the looming issue of economic stagnation for China may be coming sooner than first thought.
The slowdown has, however, led to the implementation of a wide variety of schemes with both domestic and international scope - all aimed at promoting economic growth. One of these is the 2.5 day long weekend that looks to give all workers in the province of Hebei an afternoon off on Fridays to boost consumption. The extra afternoon is supposed to be part of a push to boost the Chinese ‘night economy’ which has been propped up by other government-led initiatives to extend business hours into the evening to increase potential revenue. This has been recently implemented in Beijing at a time when the city has been doing more to encourage businesses from overseas to set up branches in the country’s capital.
This shift in focus towards domestic consumption follows rising opposition to a presently factory-centric economy that has been the model of which China has experienced much of its recent economic growth. The model is seen to be inefficient and far too centred around international exports. With China-US trade relations having been left in tatters and tariffs being placed on an astounding $250bn worth of Chinese goods as a consequence of the recent trade wars, this shift is more welcome than ever.
China’s growing middle class could be the way out of this problem and is what the government seems to be capitalising on with the advent of this scheme and other consumption-based initiatives. If there are any doubts to be had in regards to the viability of the Chinese domestic market, the spectacular rate at which the bourgeoning middle class is growing may be enough to dispel them. In 2000, just 4% if China’s urban population were considered middle class. In comparison, a staggering 76% of the country’s urban population will be considered middle class by 2022. A growing middle class means a growing consumer market, and this growth in domestic consumption may be the cause for the rebirth of the Chinese economy as a service-based superpower.
Whether or not this break has an effect on the economic slowdown, it is sure to be welcomed by the workers of Hebei and it is a marker of a maturing Chinese economy, moving past its manufacturing roots into a prosperous future.