Memo to global economy: Don't expect a bailout from Chinese consumers

It's been one of those weeks: The U.S. Congress passed another multi-billion-dollar stimulus plan whose exact execution no one seems to understand; xenophobia's getting uglier in the U.K., where unions are up in arms over another deal with an overseas manufacturer; the G7(8?) is meeting soon but no one really seems to know what good they could possibly do, anyway.

To what remedy could the world possibly turn to save us from this spiralling, panic-ridden economic mess?

I know! Get China to fix it!

Yes, the clarion call for Asian (read: Chinese) consumers to pick up the purchasing slack and buy stuff--lots of it--is still out there.

Even former Canadian prime miniser Paul Martin is insisting economic salvation will come in the form of ramped up consumer spending in the Middle Kingdom.

"The consumer today who is really generating the large savings, but whose consumer needs have not been met, is the Asian consumer....And that consumer is going to have to step in and fill the breach."

Well. Maybe that'll happen...and maybe not.

Things aren't looking all that economically rosy in Zhongguo: Exports plummeted a mind-boggling 17.5 per cent in January compared to January, 2008--a scary number when you consider China's become accustomed to double-digit growth. Until a few months ago, the biggest economic problem worrying policymakers was how to slow down an overheated economy.

Along with that precipitous drop in exports is a plunge in imports-- a dizzying 41.3 per cent. That means fewer commodities (yeah, sucks to be Jianada) to feed and fuel a country of 1.4 billion people who are spending less in the face of a truly global economic slowdown.

It's easy to look at China's huge population and think, "Totally: These people live in the world's third-largest and fastest-growing economy. Why can't they just start buying stuff, and help the rest of us out?"

Chinese people save, on average, about 30 per cent of their income. This is enormous--especially when you consider that up until very, very recently, Americans spent more than 100 per cent of what they made (hello, credit-based society).

True--in some ways Chinese people in a less crappy economic situation than your average American, saddled with a mortgage and credit-card debt and other fun stuff.

But Chinese people save because for most of the past 60 years, the Chinese government's explicit policy was to train its domestic population to consume as little as possible, focusing on an export market driven by an army of low-paid workers. Sure, in the past few years consumption here has risen immensely. Purchases of such luxury items as cars has risen by more than 20 per cent year on year. But those rising numbers are deceptive: China's middle- and upper-class consumers are buying far, far more than they were before because a couple of decades ago such purchases were simply out of the question. Per capita consumption, like per capita income, is still pretty miniscule--especially when compared to the U.S. buyers everyone wants Chinese people to emulate.

And spend more is the last thing anyone in this country wants to do.

There are more than 20 million unemployed migrant workers in limbo between rural and urban areas, trying to figure out how they're going to feed their families in the midst of the biggest drought in more than 50 years. Employees everywhere fear layoffs as companies--many of them the private, foreign enterprises that have become so prized in commercial hubs like Shanghai--close, often without paying staff members what they're owed.

To put it mildly, these people aren't exactly dashing to the nearest mall to buy the latest flatscreen HD television.

And trust me, Beijing's trying.

In January the central government halved taxes on small vehicle purchases. Last week Beijing rolled out a national program offering farmers a 13 per cent rebate on such expensive items as cell phones, televisions and refrigerators.

The government has also announced billions of yuan in funding for health care. The hope is that if people don't have to save up for fear of getting sick and having to pay sky-high medical bills they'll spend that money on a trip to Ha'erbin or a new Lenovo laptop.

No go.

Instead, thousands of people are posting to online forums urging them to live on no more than 100 yuan a week. They swap posts on how they're biking to work, making their lunches at home and cutting back on entertainment costs.

Electricity consumption has fallen to an eight-year low across the country—a sharp contrast to last year's power outages thanks to undersupply.

A January survey found almost two-thirds of respondents—all of them urban, middle-class Chinese—plan to cut back on spending, if they haven't already.

No one I've spoken to plans to spend more than before. Like their North American counterparts, they're terrified of being fired and, if anything, are cutting back in a big way. They laugh when I ask if they think the 4-trillion-yuan stimulus promised last fall will push them to shopping malls (well, okay, they could just be laughing because I'm awkward and foreign. But they laugh harder when I ask about the stimulus).

In the meantime, Beijing has its hands full trying to prevent mass unrest over the worsening economic situation. Plummeting purchases may be bad. But desperate, jobless migrants and freaked-out, jobless college grads will be a lot worse if they riot.

If ramped up Chinese consumption is the bailout the rest of the world is looking for, we should perhaps start casting around for a more stimulating Plan B.