China's economy Is booming. Shoppers are skittish anyway

But exports and property investment can carry China’s growth only so far. Now China is trying to get its consumers to return to their pre-pandemic ways, something other countries will soon have to grapple with once more vaccines become available.

Demand for Chinese exports is expected to weaken later in the year. Policymakers have moved to tamp down overheating in the property market and in the corporate sector, where some firms have borrowed beyond their means. Many economists are looking for signs of a broader recovery that relies less on exports and the government and more on Chinese consumers to juice growth.

A slow vaccination rollout and fresh memories of lockdowns have left many consumers in the country skittish. Restaurants are still struggling to bounce back. Waiters, shopkeepers and students are not ready yet for the “revenge spending” that economists hope will power growth. When virus outbreaks occur, Chinese authorities are quick to put new lockdowns in place, hurting small businesses and their customers.

To avoid a wave of outbreaks in February, authorities canceled the travel plans of millions of migrant workers for the Lunar New Year holiday, the biggest holiday in China.

“China’s COVID strategy has been to crush it when it reappears, but there seems to be a lot of voluntary social distancing, and that’s affecting services,” said Shaun Roache, chief economist for Asia Pacific at S&P Global. “It’s holding back normalization.”

Wu Zhen runs a family business of 13 restaurants and dozens of banquet halls in Yingtan, a city in China’s southeastern Jiangxi province. When China began to bounce back last year, more people started going to her restaurants for their favorite dishes, like braised pork. But just as she and her employees began preparing for the Lunar New Year, a new COVID-19 outbreak prompted authorities to limit the number of people allowed to gather in one place to 50.

“It should have been the best time of the year for our business,” said Wu, 33.

This year, Wu decided that closing the entire business over the holiday would be cheaper. “If we want to serve Lunar New Year’s Eve dinner, the labor wage for one day is three times higher than the usual time. We save more money by just closing the doors and the business,” she said. It will be the second year in a row that the restaurants shut their doors over the holiday.

Wu inherited the business from her father two years ago and employs more than 800 people. Before the pandemic, three-quarters of the business revenue came from big banquets for weddings and family reunions. She said business had yet to return to normal after months of crushing virus restrictions.

The setbacks facing small-business owners like Wu are also affecting regular consumers who are jittery about opening their wallets. According to Zhaopin, China’s biggest job recruitment platform, more jobs in hotels and restaurants, entertainment services and real estate are available than a year ago. But households are still being cautious about spending.

Families continue to save at a higher rate than they did before the pandemic, something that worries economists like Louis Kuijs, who is head of Asian economics at Oxford Economics. Kuijs is looking at household savings as an indication of whether Chinese consumers are ready to start splurging after months of being stuck at home.

“More people still seem to not go all the way in terms of carefree spending,” he said. “At times there are still some lingering COVID concerns, but there is perhaps also a concern about the general economic situation.”

Many families took on more debt last year to buy property and to cover expenses during the pandemic. China still largely lacks the kind of social safety net that many wealthy countries provide, and some families have to dip into savings for health care and other big costs.

Unlike much of the developed world, China does not subsidize its consumers. Instead of handing out checks to jump-start the economy last year, China ordered state-owned banks to lend to businesses and offered tax rebates.