Enodo Insight
- Beijing’s zero-Covid U-turn brought relief and uncertainty
- “Our goal is to survive rather than thrive”
- These notes describe a road trip just before the lunar new year holiday
What’s the duck capital of China? And don’t even think about saying Beijing. My hometown Nanjing, the Jiangsu province capital, is renowned for its duck-based dishes, an offshoot of Huaiyang cuisine, one of China’s Four Great Culinary Traditions alongside Cantonese, Shandong and Sichuan.
We were big on duck centuries before Beijing stole the limelight – and our duck. Blame one of our own: Ming emperor Yongle, a Nanjing lad like me, moved the dynastic capital north to the Forbidden City in 1421, and took the palace’s duck chefs with him. Or so the legend runs.
But we still do it better. For three long years, I’ve been drooling for duck blood vermicelli soup, salted duck and duck fat sesame pastries. The pandemic kept me in London until mid-December 2022, when Beijing began unbuttoning the “zero-Covid” straitjacket.
Finally, I could start a long-planned trip home, a six-week stay visiting provinces which generate 40% of GDP and house 35% of the population. To see family and friends, take the temperature of China today – after three years sealed off from the world – and devour those delicacies.
“Have you been positive yet?”
That’s how people greeted each other. And that was a sea-change. Throughout the pandemic, testing positive for Covid-19 could spark the literal lockdown of your entire apartment building or neighbourhood. From London, I sometimes asked friends if they knew of any positive cases, but the answer was always “no”.
By mid-December, it made more sense to ask “do you know anybody who hasn’t been infected?”
The Party’s U-turn away from zero-Covid measures in late November and early December caught everybody by surprise. Controls melted away. Like many people returning from abroad, I hoped to see life quickly return to normal, after completing my five-day quarantine in a state-appointed hotel. I was wrong.
Although the healthcare system was almost overwhelmed, an ambulance was still required to transfer me (like all overseas arrivals) from quarantine to my home, along scarily quiet streets. Just before my arrival, my parents tested positive. But an abundance of caution, familiar to anyone with Chinese family, meant they worried more about me (never knowingly infected). So my parents re-imposed the “zero COVID” policy at home! I was grounded, in my room, with food and essentials left at my door.
At least that lent time to investigate. I telephoned health officials and front-line workers, to hear complaints about the sudden reopening leaving hospitals unprepared. They had to transform all departments into Covid treatment units, and allocate more staff to intensive care, experienced or not.
A renowned Chinese economist called the April-May 2022 Shanghai lockdown “no movement, no GDP”. Now the slogan became “no going out, no GDP”: nine out of every 10 people I spoke to chose not to leave home for at least two weeks, due to being infected or from fear of infection.
Serving up hope
Once several relatives had tested negative again, my family reunited to celebrate the new year of the rabbit at Old Huang’s restaurant. A friend of my uncle, Huang serves traditional Huaiyang cuisine, including salted duck and lion’s head meatballs. Huang hoped to get his business back on track ASAP, even as he listed obstacles including the labour shortage and rising meat and vegetable prices.
“I haven’t seen him smile and be this excited for years,” said my uncle. Regular eat-in dining, without restrictions on numbers, had only resumed in December, and the entire services sector prayed for a bounce in early 2023. Huang still prepared takeaway for customers too nervous to gather in public.
As life resumed some kind of normal, I kicked off my grand tour through several towns in Jiangsu, an economic powerhouse slowed badly by Covid. Yet the pandemic brought opportunity for some. “We did make some money”, the founder of a medical device company told me at China Medical City in Taizhou. He left work at a pharmacy to start his business in 2021 making face masks, thermometers and oxygen machines. “All medical companies in the area are on a hiring spree as demand is so high nationwide”, he said.
Most sectors nosedived. My friend Yan, owner of an agricultural machinery factory, had to lay off over 50% of workers last year, as orders stayed far below previous years.
“We’re worried by uncertainties both in terms of new orders and new policy,” said Yan, while weak overseas demand is hurting the employment situation in manufacturing.
Public trust dented
China’s pivot from strict controls brought widespread relief but also uncertainty about future policy direction. Several business owners voiced these fears: “the government could do whatever they want without any justified reason”; “officials could lock your door one minute, but open it and invite you to go out the next”.
As policies became more unpredictable, a majority of business owners I encountered showed a more cautious approach to business investment and expansion.
“I understand the policy shift hurt the government’s credibility, but we are less motivated to quickly restore business confidence amid the economic slowdown,” one official told me. “The first task, for now, is to save lives. Keeping the death rate low is a ‘hard requirement’ for performance reviews.”
Back in business: my family joined me to visit bustling Changsha, the capital of Hunan, another province with awesome food. An “Internet celebrity city”, Changsha is known for night markets, entertainment venues – and hosting Mao Zedong in his youth. Local friends sounded confident that visitors would keep flowing, to grow the city’s services and tourism-oriented economy.
On to Guangdong, China’s richest, most populous province, for a sobering message. “Our goal is to survive, rather than revive” was the consensus of my host Li and his entrepreneur friends in Foshan and Guangzhou cities. Li runs an import/export company trading in clothes, red wine and small home appliances. Many companies, especially in foreign trade, have closed in the past three years, while the survivors have so little money that recovery is tough.
Reluctant to spend
The volume of retail sales in China fell by 3.2% in the year to last December, so I asked people I met about their appetite to consume. Demand for essential goods, including food and personal-care products, has risen as many people remain in a pandemic mindset, where fears of further lockdowns push them to stock up on supplies for potential second and third Covid waves.
But the middle class appears increasingly reluctant to spend on non-essential items.
A “wait and see” mood prevails among people who told me they’re either waiting for more government support for consumer spending, or reassessing how necessary their purchases really are.
The Covid crisis and unpredictable policies have pushed households to save more as they conclude that, in the end, it’s their own job to protect their family’s health – and more savings will help access better healthcare services. Also, some worried that the negative income shock may prove permanent.
My interlocutors didn’t talk much about housing, despite property forming the largest component of household wealth in China, and a hotspot issue for western media. Old schoolmates said they were content with renting for now, while others hoped authorities would offer more tax breaks and lower mortgage rates to make buying more attractive.
Truly hard choices
For more great food, plus side-dishes of insight, I met and dined with several people from the financial industry. Just how badly did the Chinese economy perform in 2022?
“You know what numbers to trust and what not to trust”, smiled one local bank executive who only believed his own bank’s data.
Although new bank loans grew at his bank last year, a substantial proportion flowed to government-backed projects, which may generate lower returns. Meanwhile, consumer and corporate loans slipped at a faster-than-expected pace and default rates almost doubled.
“Weak demand is part of the reason (for shrinking consumer and corporate loans) but not all,” he explained. “We are not a charity and are unwilling to lend to those who are more likely to default. We would only do so if there is a government guarantee, but obviously the authorities couldn’t save every single firm.” Another executive, who oversees personal loan business, said that mortgage applications and approvals fell by more than half in the past year.
Local governments have already asked banks to discuss supporting measures for real estate projects, including increasing lending quota to property suppliers and providing credit lines to selected SoEs to ensure timely delivery of new houses.
But the banking executives I spoke to expected only to see the real estate market stabilize this year, not a speedy return to growth.
The most pressing personal concern, among the finance sector folk I met, is how Xi Jinping’s Common Prosperity campaign would change their future career and life, as its proposals for wealth redistribution remain unclear.
A few worried that Common Prosperity not only means income redistribution, but also talent relocation. They didn’t rule out the possibility of being sent to work in a remote region, while their counterparts in poorer provinces are sent to take their place, although this may be “just some rumors in the industry”. None wanted to make such a move (a material downgrade for them and their family), but this levelling up agenda is well underway in the education sector, where the government aims to promote equal access to quality education by forcing teachers from good schools to teach in poorer schools.
“Follow the directions of the central government”, a banking veteran reiterated. But that can be hard. As underwriting of bad debt surges in their loan book, his bank is also less motivated to follow government orders to offer more support to SMEs.
“If we offer less financial support to the targeted sector, regulators would ask you why, but if we lend to enterprises which lack the capacity to repay, shareholders would also question you,” he said. “Truly hard choices.”
Study at home, kid. Banking is regarded as the highest-paid industry in China, whose executives routinely send their offspring to study overseas. But almost two thirds of the 10 bank executives I met had, over the past three years, decided not to send their children abroad.
Why? The income drop is real, so some could no longer set enough money aside. Also, employers are now encouraged to hire more graduates with domestic educational backgrounds, so those returning from abroad may no longer expect the recruitment and salary perks of old. “The cost-benefit analysis, and deteriorating US-China relations, taught us to think twice before making the million-yuan decision”, said one senior executive. “’Dual circulation’ has taken shape from the talent perspective”, explained another.
Conclusion
As we say in Nanjing, “without duck, it’s not a proper meal.” The city consumes an estimated 100 million ducks – in a regular year. The eager festive diners I witnessed suggest Nanjing’s consumers will easily hit that total again in 2023.
Overall, my countryfolk are hungry to get working, trading and travelling again, though (understandably) nervous about Covid and its longer-term effects. But with the first Covid wave subsiding and a devastated economy, China has assembled the ingredients for a recovery.
Yet consumers remain cautious, small business owners are wary about new investment, and well-off bankers worry about their personal future in Xi’s levelling up agenda.
A “wait and see” attitude has spread among many sectors of society as the mismanagement of the pandemic and the sudden and inept reopening have dented people’s faith in the authorities’ abilities.
I hope these titbits from my travels whet your appetite to return to China soon – and explore further when you’re there. It was not a scientific survey but a journey full of honest enquiry, and a whole lot of duck.