China Claims Economic Boost From Cancelled Migrant Plans – Analysis

By Michael Lelyveld

To hear China's state media tell the story of the country's cancelled annual holiday, the economy has never had it so good.

Ordinarily, many millions of migrant workers make the long trek from China's production centers to their family homes in rural areas for the 40-day stretch around the Lunar New Year and Spring Festival, giving themselves and the country's factories a needed rest.

Not this year.

After weeks of indecision over sporadic COVID-19 outbreaks in several provinces in January, the authorities clamped down on migrant movements with a bewildering barrage of quarantine, isolation and testing rules for trans-provincial travel.

The rules were published on Feb. 3, nine days before the Lunar New Year when migrant workers would normally be celebrating at home.

While the requirements made many trips and family visits impossible, the authorities took pains to avoid the appearance of a sweeping second-wave lockdown, a year after the COVID-19 epidemic spread from Wuhan.

"Staying put is a recommendation rather than a mandate, with the final decision left to individuals," the official Xinhua news agency said in a commentary on Feb. 10.

"However, it is a test of the government's effectiveness as it seeks to strike a delicate balance between ensuring overall safety and facilitating family reunions," it said.

The commentary appealed to patriotism, self-sacrifice and the common good.

"By sacrificing the family reunions of some, the country is striving to protect the life, health and freedom of many more," Xinhua said.

The campaign to curb travel appears to have worked on several levels, although verification may prove difficult.

Over 77 percent of China's 280 million migrant workers were expected to forgo travel during the holidays, the South China Morning Post reported, citing a survey conducted by the Chinese Association of Labor Science, the Counselors' Office of the cabinet-level State Council and Xinhua.

On Feb. 9, health authorities were able to report that the number of "locally transmitted" and confirmed COVID cases had dropped to zero for three days in a row. Officially recorded cases in the locally transmitted category have been minimal since then, while reports of "imported" cases have continued as before.

‘Staycation’ shopping

In what may be another controversial outcome, China also claimed success on the economic front with a surge in consumer activity, thanks to the "staycation" that reportedly kept over 200 million workers away from their homes and close to their jobs.

State media have promoted the feel-good story for the economy with data on traffic and travel.

During the holiday week, the rails, roads and airlines carried 98.4 million passenger trips, down 34.8 percent from the comparable 2020 period and nearly 77 percent below that of 2019, the State Council said.

But rail freight volume of nearly 73 million metric tons rose 23.7 percent in a sign of stronger economic recovery this year, Xinhua reported, citing China State Railway Group figures.

Major cities including Beijing, Shanghai and Tianjin saw surges in retail sales during the holiday period with some increases over 60 percent from the comparable period a year before.

In Beijing, 100 major retailers, caterers and online platforms recorded 43-percent sales growth, the municipal commerce bureau said.

The official English-language China Daily said that cinema box office receipts set a record of 7 billion yuan (U.S. $1 billion) during the new year holiday week.

The Ministry of Commerce (MOC) also reported combined sales of "key retail and catering enterprises" from Feb. 11 through Feb. 17 climbed 28.7 percent from a year earlier to 821 billion yuan (U.S. $127 billion).

In a further sign of recovery from the COVID-19 crisis, this year's take at the selected enterprises also topped 2019 sales from the same period by 4.9 percent, the MOC said.

China Daily cited analysts as saying that the holiday shopping spree "heralded a stronger year of consumer confidence and domestic market expansion in 2021," following a 3.9-percent slump in retail sales of consumer goods last year.

So far, weak demand has been the missing link in China's official recovery narrative, although consumer spending accounted for 54.3 percent of China's gross domestic product last year, according to the National Bureau of Statistics (NBS).

Positive spin

But there are reasons to doubt the conclusion that China's economy has been given a boost by the misfortunes of migrant workers who missed their once-a-year chance to visit their homes and families.

While some were given incentives and shopping coupons as compensation, the Morning Post reported that workers were wary about spending after losing income last year.

Some employers had shut down production rather than pay higher holiday wages, the paper said.

Any gains from increased spending in production centers and cities seemed likely to be offset by reduced holiday spending in rural areas from the skipped visits this year.

Year-to-year comparisons of travel data and sales growth during the Spring Holiday are unlikely to provide a valid measure of economic strength, since the spread of the epidemic last year prevented many migrants from returning to their jobs for weeks or months after their scheduled time off.

The reports of improved sales have been distorted by both unprecedented population shifts and the historic downturn during the lockdown last year.

In the first quarter of 2020, retail sales of consumer goods plunged 19 percent, according to MOC data.

But China's official media appear to be intent on finding a positive economic outcome from the massive disruptions caused by the pandemic, said Derek Scissors, an Asia economist and resident scholar at the American Enterprise Institute in Washington.

"This year, the cancellation of the Spring Festival is said to be positive for sales, demand and the economy. And next year, the return of the Spring Festival will be said to be positive for sales, demand and the economy," Scissors said.

Even before the extraordinary dislocations affecting the migrant workforce for the second year in a row, the official statistics on retail sales and demand were seen as unreliable.

"Long before COVID, these results were all manipulated. They identify peak demand from the current year and deliberately do not compare it to peak demand from the previous year," said Scissors.

Last year's weakness in sales, consumption and demand has cast doubt on the NBS estimate that China's gross domestic product rose 2.3 percent in 2020.

Scissors suspects that GDP in the first quarter of 2020 fell even further than the record 6.8 percent that the NBS reported last year.

"Regardless, the first quarter of 2021 is going to show strong economic performance across the board, including consumption. The main question is will they compare to true first-quarter 2020 data or the fake data that they published," he said.

The article China Claims Economic Boost From Cancelled Migrant Plans – Analysis appeared first on Eurasia Review.