China also has one of the highest levels of income inequality in the world, on par with countries like Brazil. As a result, wealthy families play a disproportionate role in the Chinese economy.
Consumer research by multinational companies shows that these families are engaged in what they call make-up after the pandemic. “You have found that life can end unexpectedly, so you want to reward yourself,” said Jens Puttfarcken, Porsche CEO in China.
The Beijing auto show, held annually alternating with the Shanghai auto show, has been a pretty good lens over the years to point out the strengths and weaknesses of the Chinese economy. The event is increasingly dominated by high-end brands (in line with Chinese tastes) and global ambitious domestic manufacturers.
The exhibition also showcased China’s transition from a technology lagging country to the world’s largest electric car market. Ford launched a Chinese version of the new electric Mustang at the event. NIO announced an upgrade to self-driving software on electric cars allowing them to enter and exit highways on their own.
Polestar, a joint venture of Volvo Cars and Zhejiang Geely, announced plans to mass produce electric cars next year in Chengdu. Thomas Ingenlath, CEO of Polestar, said the company is building a completely new plant using only renewable energy.
Mr. Ingenlath is one of the few CEOs who has flown to China for the exhibition. Having just been out of the hotel after a two-week quarantine on entry, he marveled at the difference in everyday life between China and Europe because of the country’s success in preventing the pandemic.
Of course, the Chinese economy is still vulnerable. Rehabilitation is still possible, especially since the virus is suppressed so quickly that very few people have a chance to develop immunity. China has responded to this risk by upholding some precautions, even as others, like wearing a mask, have become less common, especially outdoors.
China is also preparing an extensive campaign this fall to carry out flu vaccinations, aimed at reducing the number of winter visits to clinics and hospitals, with symptoms likely to be mistaken for Covid. -19.
Another fear lies in the financial system. China’s state-owned banks have flooded the economy with huge loans at low interest rates, adding to long-term worries about bad debt. Shares and bonds of China Evergrande Group, one of the country’s biggest real estate developers, plunged last week on concerns about how it has managed over $ 120 billion in debt.
The third concern lies in the health of small and medium enterprises. This group often lacks the connections necessary to obtain loans from the state-led banking system.
In addition, the persistent social gap rules mean service industries are not recovering as well as manufacturing. Box office receipts at Chinese cinemas fell 57% in August from the same period a year ago, as spacing rules reduce theater capacity.
But these worries seem very distant at the auto show. Liu Xiaozhi, a former auto engineer now on the board of a car company, says the country’s success against Covid-19 has kept people comfortable spending money.