The ruling Chinese Communist Party (CCP) has released consumption data for the Chinese New Year holiday, with state media boasting that the domestic consumer market is “hot.” However, finance experts rebuke the claim, pointing out that the slumping Chinese economy is entering a situation akin to the Great Depression (1929–39).
The Data Center of the CCP’s Ministry of Culture and Tourism in recent days released information stating that there were 474 million domestic tourism trips during the Chinese New Year holiday from Feb. 9 to Feb. 17, and domestic tourists spent a total of 632.68 billion yuan (about $87.9 billion) on travel. The sales of key retail and catering companies across the country increased by 8.5 percent year-on-year on a comparable basis. The CCP’s official media claimed that China’s economy had a “good start” in the Chinese New Year based on holiday consumption data on tourism, catering, retail, transportation, and movies, among others.
The Chinese economy continued slumping in 2023 after the CCP abandoned its restrictive “zero-COVID” policy control measures, which put the economy under lockdown for three years. All economic sectors have experienced a downturn characterized by a decline in exports, stagnant domestic demand growth, significant decreases in manufacturing production and sales, a collapse in real estate, and slowdowns across most service industries. China’s stock market crashed in late January and early February, reaching the lowest index in years, with thousands of stocks hitting the limit down.
A Chinese financial commentator known as “Da Liu Shuosuo,” who has 3.84 million followers on Chinese social media, posted a video online stating that although consumption during the Chinese New Year has rebounded, it exhibits the traits of false prosperity. “Behind the hundreds of billions of consumption is the contraction of trillions of consumption. It’s a ‘lipstick economy,’” the commentator said. The concept of “lipstick economy” or the “lipstick effect” suggests that consumers with limited funds are inclined to purchase affordable luxury items during economic downturns. It is also called the “low-price product preference trend.”
Voice of America (VOA) published an article by Shanghai political scientist Jiang Feng (pen name) earlier this month, titled “The Great Depression is Coming: The Historic Moment of ‘Shanghaiization.’” The article noted that the atmosphere on the eve of Chinese New Year was peculiar. “The Chinese people are helplessly watching the onset of the Great Depression,” Mr. Jiang wrote. The article pointed out that this year, more businesses and factories closed early before the holiday compared to previous years. Every industry is in depression, and the occurrence of “bosses running away [without notice or paying salary or debts]” has almost become the new norm, according to Mr. Jiang.
On multiple social media platforms, many Chinese complain about the downturn they have witnessed in various industries, such as store and business closures, plummeting real estate prices, unemployment, and huge losses in stock trading. After the Chinese New Year, upon returning to work, many people across the country posted on Chinese social media that the companies or factories they worked for had closed permanently after the holiday. The VOA article pointed out that China’s economic model is increasingly characterized by an internal circular economy that operates against the principles of a free market and is dominated by political powers. This shift has resulted in the erosion of both the Chinese economy and its political landscape. The article suggests that this phenomenon, characterized by empty promises made by Chinese officials, is the root cause of an inevitable “Great Depression” in China.