Less Price Control : Buy, Enjoy Is New Ethic for Chinese
It is a typical Thursday night in the Yueyou (Happy Friend bar and cafe) in the center of Peking. Stevie Wonder’s “I Just Called to Say I Love You” is playing in the background, and all the tables and booths are occupied.
The crowd is entirely Chinese. Many are well-dressed young professionals. Some of them have wandered in from the concert hall next door. They are doing something their parents’ generation never would have dreamed of doing--blowing a bit of their own money on beer, wine and night life.
A few blocks away, in the state-owned Modern Times cocktail lounge, He Wenzhong, a well-tailored official at Radio Peking, sips from his can of Japanese Asahi beer and explains his philosophy of finance: “When you put money in the bank, you get nothing. When you spend it, you enjoy life. People are working harder now, and they want to enjoy life.”
Stems From Reforms
Such feelings are an outgrowth of China’s ongoing economic reforms. The gradual lifting of price controls in China and the continuing inflation that has accompanied it have brought in their wake the first stirrings of a consumer society in the world’s most populous nation.
Old notions of thrift and austerity are being cast aside. Not only common street wisdom, but some of China’s most prominent economists are spreading the notion that spending money is not such a bad thing.
“The concept of consumption should be changed,” Li Yining, a Peking University economics professor, said in an interview with the government-run newspaper China Youth News last summer. “Consumption that does not exceed the limits of one’s income, even if it is consumption for high-grade commodities, should not be regarded as extravagance.”
TV Sales Up 50%
The Chinese, particularly young Chinese, are heeding the advice. This year, the signs of consumerism are everywhere.
Sales of color television sets were up by 50% for the first half of 1986 over the same period a year ago, and sales of refrigerators were up by 45%. Chinese department stores have also put a few video recorders on display. Their prices are so high that the VCRs are often bought in the name of Chinese enterprises, not by individuals.
A few years ago, foreigners stationed in China were asked to buy basic items in short supply, such as cooking oil or beer, for their Chinese friends. Now, it is not uncommon for a new request to be added to the list: a loan of videotapes.
Over the last few months, more and more young Chinese women in major cities have begun to wear lipstick, makeup, shoes with narrow high heels and Hong Kong-style fashions. For Chinese men, the sign of status is a Western-style wool sports jacket or suit.
Lines at Counters
At the Xidan department store, one of the largest in Peking, big crowds now line up at the cosmetics counters.
On a recent Saturday, Xi Huirong, a Peking office worker, stood at the counter examining a special new da bao (big protection) quick-remove wrinkle cream. “I’ll try it,” she said after hesitating for a moment.
Three jars cost 6.7 yuan ($1.80), roughly a quarter of a week’s wages, but her husband raised no objection. The saleswoman, Zhang Chengmei, said she now sells 600 jars of the cream each day.
Allows More Choice
For the time being, at least, the Chinese regime has decided to tolerate the national splurge on fashion and cosmetics. This year, a signed article in the People’s Daily, the official Communist Party newspaper, said that whatever people choose to wear is a private matter, unrelated to politics.
Not everyone in China is able to take part in the new consumer boom.
According to official figures, approximately 5% of China’s urban population of 200 million people are living in poverty. The average per capita income in Chinese cities is $17 a month, but, for these 10 million urban poor, the average per capita income is less than $9 a month.
Poor ‘Badly Hurt’
“They have been badly hurt by the increase in living expenses in the last couple of years,” the newspaper China Daily reported last week.
In September, Song Tingming, an economic adviser to Premier Zhao Ziyang, estimated that, in the Chinese countryside, about 50 million to 60 million of China’s 800 million peasants are living in such poverty that they lack sufficient food, clothing and shelter.
“That’s as much as the population of Britain or France,” Song said.
Nevertheless, in both rural and urban areas, the majority of Chinese over the last couple of years have been buying goods and spending money as never before.
China’s buying spree dates to the fall of 1984, when the Communist Party adopted a package of market-oriented economic reforms for urban areas. As part of the program, the party announced that it would begin to lift price controls on many items and let prices be determined by forces of supply and demand.
Anticipating Price Rises
In anticipation of price rises, Chinese families rushed to stock up on food and began buying consumer goods such as television sets and refrigerators in unprecedented numbers.
Last year, the regime let prices shoot up by as much as 50% to 100% on meat, fish, vegetables and all other food items except rice and bread. According to official Chinese figures, the overall inflation rate in Chinese cities in 1985 was 11.8%, and some Western economic analysts believe the actual rate was somewhat higher.
Last year’s price increases were hefty enough to touch off a bit of social unrest. When a series of demonstrations occurred on Chinese campuses last fall, inflation was one of the most frequently mentioned sore points among the students.
In January, Premier Zhao announced that China would “consolidate” the recent changes in the national economy this year and would not take any new steps toward price reform.
Fewer Controls
During the first eight months of 1986, inflation slowed to an annual rate of 5%, according to Chinese figures. That was well below the rate a year ago, but it is still extraordinary by the standards of a country whose Communist leadership once published a book entitled “Why There Is No Inflation in China.”
Then, at the end of the summer, the Chinese regime lifted price controls on a new series of consumer goods. Prices of bicycles, the nation’s principal means of transportation, were allowed to float. So were prices of refrigerators, washing machines, tape recorders, cotton yarn and black-and-white television sets.
Since then, China’s ministry of light industry has removed price controls on 749 more consumer items, including stationery, shoes, clothing, toys, cosmetics and furniture. The price of a liter of milk has been raised by 38%.
And official statements have hinted at further price increases next year. A leading Chinese economist suggested in August that China will lift price controls on raw materials, energy and transportation costs and acknowledged that some of these increases might be passed on to consumers.
Problems With Shortages
These days, when ordinary Chinese get together, either in cities or in the countryside, the conversation quickly turns to the subject of which prices will be going up next, and when. Authorities sometimes devote their energy to dispelling some of these rumors, which produce panic-buying and shortages.
“The rumor has recently gone around among the masses that the prices of color TV sets, grain, edible oil, brand-name cigarettes and wine, and so on, are to be raised. There is not the slightest basis for this rumor,” an official in Shaanxi province said in a radio broadcast from Xian last month. “I hope consumers will rid themselves of unnecessary worries and apprehensions.”
When authorities released detailed statistics for the Chinese economy in the first nine months of 1986, they said they were unable to release the nine-month figures on inflation.
Zhang Zhongji, a spokesman for China’s state statistics bureau, said that inflation figures for September were not yet completed and ready for release. He said that preliminary estimates indicated the rate was “not high” but that, because of the recent lifting of price controls, there had been some “minor fluctuations in prices in some places.”
Spending Up in ’86
The official Chinese figures indicate clearly, however, that Chinese people have been both earning and spending a lot more money this year.
Wages paid out in the first nine months of this year were 20.4% above the level of a year ago--far over the target of 7% growth set by the government. Much of this increase represents bonuses paid by Chinese enterprises to their workers.
One Western analyst termed the increase in wage levels “troubling” and said it demonstrates the continuing inflationary pressures at work in the Chinese economy.
Retail sales, the indicator of how much money Chinese are spending, increased by 14% during the first nine months of 1986 and by 18% in the third quarter. In the state’s five-year economic plan for 1986-90, the target was for annual retail sales increases of about 7%.
“There definitely is a spend mentality, and it’s been encouraged by the recent price increases,” according to a Western diplomat who follows economic issues.
Prefer High Quality
The new Chinese consumers are not spending money on everything. The taste seems to be particularly for goods of the highest quality--either imports or the very best Chinese products. Chinese buyers want not just a television set but a color set; not just any refrigerator but a two-door model; not just a washing machine but a twin-tub machine.
As a result, Chinese officials admit, large backlogs are building up of goods produced by Chinese enterprises that consumers believe are inferior and refuse to buy.
The whole concept of a consumer society remains as new and strange to Communist China as the idea of laws of supply and demand and the other economic changes taking place.
Lacking Guidelines
“It must be acknowledged that China lacks experience in providing guidance on consumption,” the Communist Party newspaper Economic Daily said not long ago.
At the Modern Times bar, Fan Dongfeng, 27, an official in a state machinery enterprise, puts things more simply: “It’s human nature that people demand more things to make their lives comfortable.”
A companion at his table, Shen Li, 26, a saleswoman in a local department store, admits to the ultimate dream.
“Some day, we would like to be able to buy a car, like you Americans do.”
