Fallout: The Financial Crisis

When will China emerge from crisis?

Scott Tong Mar 10, 2009
HTML EMBED:
COPY
Fallout: The Financial Crisis

When will China emerge from crisis?

Scott Tong Mar 10, 2009
HTML EMBED:
COPY

TEXT OF INTERVIEW

Kai Ryssdal: Chinese consumers got a break today. Beijing reported consumer prices fell more than 1.5 percent last month. It’s just the latest sign that the once hot, now not, Chinese economy is having the same troubles the rest of us are. And that could be a factor in how fast we all get out of this mess. We’ve got our China correspondent Scott Tong on the line with us. Hey Scott.

SCOTT TONG: Hello Kai.

Ryssdal: So we all know, sadly, how a recession feels here. What does it feel like in an economy like China?

TONG: Well, it’s bad and it’s not-so-bad here. Let me tell you what I mean. My five-year-old daughter, Audrey, a couple weeks back comes in and declares that her self-appointed Korean boyfriend in her kindergarten class is no longer there. He’s moved back to Korea forever, unquote. And it turns out tens of thousands of Koreans have actually left Shanghai. A lot of Japanese have left as well because of how bad the economies there are back home. So what that shows us is the global-economy part of China is bad. Multinational companies who are here to manufacture stuff or sell stuff or the people who give advice to these companies, how to do it, you know lawyers and financial consultants, a lot of them are flat on their back. On other hand, you can’t get a taxi in Shanghai. Forty-five minutes on Saturday, and I’m just sitting there trying to get one. What that tells us is that there are other parts of the Chinese economy that are still moving. The domestic China store. Millions of people buying their first car, their first life-insurance policy, their first microwave oven. So it’s a kind of slow down, and the numbers reflect that.

Ryssdal: So is there pressure for Beijing, for the government, to do something about it? And if so, what?

TONG: Well, the government is in all-out stimulate-the-economy mode. Remember way, way back in 1992 all of us Americans were saying it’s the economy stupid. Well, here it’s the unemployment stupid. Six million or more unemployed college graduates, 20-30 million unemployed migrants who used to work in factories that aren’t operating anymore. So the government’s answer is massive stimulus. They’ve put out half-a-trillion dollars to try to help exporters stay afloat, to tell banks to lend like mad. And China is building stuff: roads, train tracks, power lines, cell phone towers. So a lot of scaffolding, all over China.

Ryssdal: What about though, Scott, when you go out and report stories? What are workers in the Chinese economy telling you? Are they looking to the government to pull them out of this?

TONG: Talk to migrants, and you do feel the pain. There’s more anxiety about what their next job is going to be. But do they look to the government to fix their problems? I don’t hear that very often. The Communist party a generation ago kinda of ditched this thing called the “iron rice bowl,” where the government takes care of your entire life. And so a lot of migrants in China have to depend on themselves. The example that I often think of is the man that we call to drive us to the airport when we go on a trip. He’s had like seven jobs in his career. He’s in his 40s. He used to ride this three-wheel bicycle to carry bricks around Shanghai, recycling stuff, and then he drove a taxi and now he drives a van for hire. These Chinese migrants often have this amazing capacity to reinvent themselves, and I think there’s going to be a lot of this trial, or maybe error and trail, for a little while and then we’ll see how desperate things get. But it doesn’t feel like we’re there yet.

Ryssdal: What’s your sense though, Scott, about how quickly China might be able to turn it around? Do you think that China might be able to come out of this more quickly than the United States?

TONG: Well, you don’t see it yet. That’s for sure. This week there’s a lot of angst about deflation hitting the Chinese economy. Trade numbers later this week are going to be awful. The optimists say China may emerge first this summer. And the reason is well, the West had two problems: It had a bank problem, and it had a real economy and human being problem. And China’s just had one. They have to work on the economy and get jobs for people. But the banks are in very good shape. Sure, they have the efficiency of the DMV when you walk in, but they lend, they lend a lot. So there may be signs that in the next few months China may be bottoming out. That’s the good case scenario.

Ryssdal: Scott Tong in Shanghai for us. Thank you, Scott.

TONG: All right, Kai. Nice to talk to you.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.

There’s a LOT to celebrate!

It’s National Pumpkin Spice Day, the last day of our fall fundraiser, and thousands of fans like you have invested in Marketplace.

You inspire us, and your support makes us stronger, especially now.