Dividends and China’s factories are back, consumers are not

The President loves to talk about a V shaped recovery, he says he can feel it and maybe he is right or maybe he is wrong. One country to examine if that is what happened is China, where the virus affected the country first.

In an article by Keith Bradsher of New York Times News Service, he examined what is happening in China now that the country is reopening. China’s factories and industrial machinery is working and pollution is coming back to the cities. The problem is how to empower consumer. Many consumers, similar to in the US lost their jobs or had their pay slashed. For a generation of young Chinese people known for their American-style shopping sprees, saving and thrift hold a sudden new appeal.

Retail sales in China were down 1/6 from the previous March. It is estimate that the official unemployment rate is 5.9% the real number according to Larry Hu, an economist with Macquarie Securities is closer to 20%.

For many Chinese saving not spending is more important and that translates to retail sales staying down. What should the government do to encourage spending?

Linking to dividend paying stocks, if one person saves that is great, if everyone saves then the economy is flush with savings and has little spending. All economies need a balance of spenders and savers; coming out of a recession the savings likely is more important. If the government did what former Presidential candidate Andrew Wang wanted – give everyone an extra $1,000 a month, within a few months much of the money would be spent, we will see. The recovery looking at China will not be a V shaped ones, but slow and steady and slow and steady in your investments is a good thing.

There are more questions than answers, till the next time – to raising questions.

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