Saturday, 14 March 2020


China’s poorest pay the price of coronavirus outbreak 
Marginalised families face pressure of travel and job restrictions as income streams dwindle 
A fifth of Chinese households cannot survive much beyond two months without any income

Business is tough for the illegal taxi driver searching for fares among the handful of people waiting at the bus stop outside Picun, a migrant worker village on the outskirts of Beijing. “I used to make about 600 to 800 yuan ($86 to $115) per day, but now I’m down to 80 to 100 yuan”, he told the Financial Times, before he was asked to move off — without passengers — by traffic officials. Data suggest that the coronavirus outbreak, which has infected more than 80,000 people in China, is being brought under control. However, months of restrictions on travel, work and daily life are putting enormous pressure on families at the margins of Chinese society. A fifth of Chinese households can survive only 2.3 months without any income, while 40 per cent cannot last past three months, according to a survey of 120,000 people conducted last week by the China Household Finance Survey and Research Centre, a respected independent consultancy in Chengdu. “We cannot say if the impact of the outbreak on employment will be half a year, a year, or more, but what is for certain is that it will be longer than it is possible for some segments of society to sustain their livelihoods,” said Gan Li, director of the centre and a professor of economics at Texas A&M University.

 China outspends developed nations on roads, rail and other infrastructure. But it allocates far less money to social support measures such as affordable housing, with the ratio to gross domestic product remaining at about 3 per cent, far lower than the average of 12 per cent achieved by developed nations, according to Mr Gan. I don’t plan to make big purchases any more. Having cash in hand is what’s important Hou Xiaogang, a Beijing masseuse The lack of social support is especially concerning for workers on informal contracts such as Ms Wu, a 50-year-old migrant from Hebei who is employed as a cleaner at a branch of China Construction Bank. Ms Wu, who did not want to give her full name, usually makes about Rmb2,000 a month, but she has not been paid since December. To pay her monthly rent of Rmb1,000, she has made drastic cuts in her spending to make her meagre savings last. “Nobody is getting paid regularly. We are no exception,” Ms Wu told the FT, adding that she accepted the situation. The pressure on household finances is also threatening the spending habits of the middle class, especially young parents who tend to have far less in savings than older generations. Hou Xiaogang, a 35-year-old masseuse living in Beijing, said that the outbreak had prompted her to abandon a new home purchase to avoid paying the 3,000-yuan-a-month mortgage. “I was already under so much financial pressure last year when I agreed to the purchase that I had to cancel it,” she said. “I don’t plan to make big purchases any more. Having cash in hand is what’s important.”

 Anger about income loss and job insecurity is beginning to boil over. Shop owners last week staged small-scale protests in at least six cities, from China’s industrial north-east to the southern manufacturing hub of Guangdong. A video of one recent demonstration in Shenzhen, which borders Hong Kong, showed shopkeepers chanting “Cut rents” and waving homemade signs, even as police used loudspeakers to warn the protesters that large crowds risked spreading the virus. 

The demonstrators are unlikely to be an exception. Family-run shops, street stalls, hole-in-the-wall eateries and other small businesses employ 230m people and are particularly vulnerable to shocks because they have less capital and are less able to borrow. The small business sector accounts for about a third of China’s consumption of everyday goods, according to a report by the research arm of Ant Financial, sister company of Alibaba. However, small businesses handled only half the volume of transactions in the first two weeks of February compared with the year before. The number of transactions in Hubei province, which is at the centre of the outbreak, fell 70 per cent in the same period. Outside big cities such as Beijing and Shanghai, which are serviced by chains of convenience stores, shoppers are reliant on these small businesses, said Wang Jingyi, one of the report’s authors and a professor at Central University of Finance and Economics in Beijing.

 China’s government has released targeted measures to support businesses, such as tax breaks and loan extensions, but these are unlikely to help low-income households, said Texas A&M University’s Mr Gam. Mr Gan prescribes a one-time direct transfer of cash to individuals via online payment platforms, which he said would have a “multiplier effect on GDP . . . far, far greater than infrastructure spending”. But, he said, “the Chinese government has never been willing to give money to people directly”.

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