BEIJING — The crash in the Chinese stock market this week unnerved investors around the world, but many here who don’t gamble in stocks have other economic worries on their minds.
Waste recycler Che Zhongqing, 52, is a perfect bellwether for the problems that are besetting the world’s second largest economy beyond a volatile stock market and falling currency.
The paper, plastic and old electrical items she collects from homes in the capital are turned into materials for China’s manufacturing sector, whose exports have fallen amid a drop in demand for Chinese goods from abroad.
Che is feeling the effects of the slowdown — demand for her wares has dropped substantially over the last two years.
Today, old fridges, which contain copper and other useful metals, sell for 50 yuan ($7.6) — a third of the amount Che got for them in 2014 — and the price of plastic bottles has dropped from 1 mao (2 cents) and 0.3 mao (0.5 cents).
“There’s no money in the trade any more. I have heard it because factories are closing,” she said at her informal street-side sorting point.
For most of the last three decades, China has enjoyed breakneck levels of growth by exporting vast quantities of cheap consumer goods worldwide thanks to its vast workforce and scant concern for labor rights or the environment.
But faced with rising labor costs, an aging population and escalating pollution, the ruling Communist Party is now struggling to shift to a new economic growth model based on innovation, domestic consumption, higher-end manufacturing and services.
Matters came to a head this week when China’s problems set off a global stock market rout.
On Thursday, the Shanghai composite benchmark plunged by 7% within half an hour, halting trading for the second time in a week. The rout, set off by concerns thatBeijing is allowing the yuan to weaken too fast against the dollar, came after the Shanghai composite dived 6.9% Monday, prompting a global stock sell-off.
Thursday’s chaos led Chinese authorities to suspend the new trading “circuit breakers” — intended to damp panic — four days after they were introduced amid concerns that they were causing further volatility.
On Friday, Chinese stocks rebounded to finish 2% higher, providing respite in a roller-coaster week. Analysts said the recovery was likely due to buying from Chinese government bodies.
American financier George Soros warned that China’s flagging economy and subsequent devaluation of its currency were undermining financial stability in ways reminiscent of the global crisis of 2008.
Zhu Ning, an adviser to the People’s Bank of China, the country’s central bank, was similarly downbeat in an interview with USA TODAY on Friday.
“China is in a bubble period so that is a big uncertainty for China now and that will have profound repercussions to the rest of the world economy,” he said. “So I think Soros has a point.”
He said China’s vast and growing middle class would continue to support growth, adding that Chinese authorities have more tools at their disposal — more stimulus and more intervention in the stock market and exchange rate — to tackle the current crisis than most Western governments.
Without structural reforms such as decreasing the role of the state however, China’s service sector would not grow fast enough to compensate for a slowdown in other areas of the economy, he said.
“The biggest uncertainty is if we don’t see more reforms coming along, then China is doomed,” Zhu said.
Some other economists take a more a sanguine view, saying the recent market turmoil in China does not reflect the country’s economic fundamentals.
“China’s stock market wasn’t a mirror of the economy’s health when it was booming and it doesn’t reflect a sudden economic downturn now it’s collapsing,” said Mark Williams, the chief Asia economist at Capital Economics in London.
“The equity market is a shambles but the economic outlook is far better than commonly perceived,” he added.
That is little comfort for Che as she stacks her three-wheeled truck with flattened cardboard boxes.
“I am a farmer with no education, there is nothing else I can do,” she said.
It is for ordinary people like Che that the Chinese economy needs to keep growing.