Beijingers' consumer spending increases

Cars, houses, restaurants, movies…. All these can only be on the shopping list when people are affluent, but they have actually become favorites in the first half of 2009 in Beijing.

Although officials like to talk about “stabilization and recovery” to describe the current Chinese economy, psychologically people are still living in a past characterized by a shortage of supply. This, in addition to a fear of inflation and an increase in credit, gives rise to a hot car market and an unexpectedly irrational housing market.

Between January and June this year, 536,000 vehicles were sold in Beijing, a year-on-year increase of 22 percent. In the first half, retail sales of vehicles accounted for almost one third of total consumption in Beijing, and its contribution to consumption growth was as high as 35.6 percent, reporters learned during the Economic Situation Analysis Conference jointly convened by Beijing Municipal Party Committee and Beijing Municipal Government on July 21.

In Beijing, considered “the best place” in China, many people dream of improving their transportation, which causes automobile manufacturers and vendors to speed up production. This also opens up a larger market possibility- if there are cheap and good cars, then more people will be encouraged to live in suburbs farther from the city center, despite the increased costs of commuting between home and work, because the house prices are relatively low.

In the first half, the sales of commercial and residential buildings reached approximately 10 million square meters. This represents a year-on-year growth of 20 percent compared to 2008 when the prices were high and people waited to purchase homes. This is also an increase of more than 15 percent upon the house-buying frenzy in 2007 when buying houses was compared to buying vegetables. In the first half, residential housing made up as much as 85 percent of all sales of commercial residential buildings sold in Beijing, and total sales increased by 4 percent year-on-year.

Beijing Survey Office under the National Bureau of Statistics made the following comment on July 20, when Beijing’s economic situation for the first half year was released: “market prices for retail goods continues to fall, production prices shows a large year-on-year decline, and the housing prices rises month-on-month.” In material submitted to the Economic Situation Analysis Conference, the National Bureau of Statistics stated that there was an insufficient supply of commercial residential buildings, because there would be a 20 percent decline in floor space under construction in Beijing by the end of June compared to the end of last year. Newly started projects decreased by 30 percent in the first half compared to the same period last year. Of these, new residential projects suffered a sharp 40 to 60 percent drop.

In order to address fast-growing market demand, increase investment and stimulate domestic demand, Beijing’s property market was fully tapped in the first half of 2009 with 47.4 percent of total fixed asset investments and over 90 billion yuan being invested in the market. Of the 90 billion yuan investment, a large amount was invested in top-level land development with investment reaching nearly 42 billion yuan, up 6.2-fold year-on-year. As a result, 27,900 residents were relocated, up 8-fold compared to 2008.

In daily life, some people buy cars and houses in the event of a rainy day, but others indulge in eating, drinking and playing. This is especially true in Beijing, where the population is the most diverse. In the first half of 2009, Beijing’s per capita disposable income was 13,567 yuan, out of a total income of 4,000 USD per capita, up by 9.3 percent. Meanwhile, sales in Beijing’s restaurant industry increased by 13.6 percent, and Beijing’s movie ticket sales rose 39 percent to reach nearly 300 million yuan, compared to the same period last year audience figures increased by 37.6 percent, reaching over 82,000 attendees. 

Though the markets are flourishing, Guo Jinglong, Mayor of Beijing, admitted in the Economic Situation Analysis Conference held on the morning of July 22 that in the first five months of 2009, losses occurred in over half of the large-scale state-owned industrial enterprises. He believes that on one hand, the international community is optimistic about China and Beijing, and some international organizations have elevated their expectations for China’s economic growth, and foreign investors have increased their investments in enterprises in Beijing; on the other hand, although the evidence showing that the global financial crisis is stabilizing has appeared, the economic recovery process will probably be quite slow. The negative influence of the crisis hasn’t weakened, and the shrinking overseas market demand will not improve in the near future.

Translated by LOTO