Here in Wuchang near my home there’s a nearly abandoned electronics warehouse where the remaining tenants sell all sorts of useful products (wires, wire cutters, motherboards, lock pick kits…) If you go to the third floor of this facility and knock on an empty display wall, an old woman will push a shelf out of the way revealing a makeshift hallway filled with hundreds of (very high quality) pirated DVDs. 

The zealousness of salespeople (at least those whose products would be the first to go in the event of a downturn) is as good proxy for general commercial health of the city that you’ll probably find, since official reports are almost entirely bunk. Here’s a conversation I had with sketchy-DVD lady a few weeks ago:

Nice lady: Here, have a look at these films! They are all great… So are you married? Do you have a girlfriend?

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Me: No.

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Nice lady: Impossible! *pause* You might like this movie. It’s really good – it even has a good story! Most movies like this don’t have stories.

She promptly hands me Pirates, a 2005 adventure-p0rn about pirates. Don’t get me wrong, I enjoy a properly narrated romp through the 18th century as much as the next guy. Properly determining that I was in the target demographic (lonely young men) was also a stroke of marketing genius.

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At first glance, China’s planned fiscal stimulus (~$600b) seems wrongheaded – a continuation of existing plans to over invest in potentially useless infrastructure, like rails and education. An FT article on the topic opines:

… the planned stimulus does not attempt to boost public and private consumption. It aims, instead, to keep the economy ticking over until it can start exporting again. This will not work. This is the golden opportunity to redirect the pattern of growth towards consumption and away from the previous massive reliance on exports and investment.

Bolstering domestic demand has been rhetorically recognized as the objective of recent recent rural land reforms. At the very least, these will allow poor people to sign over their land for 40 years to a rapacious coal tycoons, and spend that chunk of money to support their move to the megacities. Decreases in exports have already impacted domestic migration patterns, given that a vast number of migrant laborers are employed in export industries - most of the rest are in construction, which is also threatening a similar downturn.

So why the focus on fiscal stimulus? I’ve argued the “culturally dependent elasticity” case before - Zhou-sixpack does not respond to price or income changes like your average Westerner. Though having enjoyed things like refrigeration and heating, most here are perfectly capable of getting by on less. As such, policy measures meant to increase domestic consumption are probably less effective than we’re used to thinking of them. If the fiscal stimulus was simply turned into a cash handout, most households would stick it directly into savings – spooked as they are about the slowing economy. 

Beijing would like to spend more on labor-intensive sectors, though keenly aware of the uncomfortable prospect of dropping money into a Keynesian black hole (欢迎你们华人加入我们的俱乐部.) As far as the boys in Zhongnanhai are concerned, however, this possibility pales in comparison to the threat posed by 1 billion+ irate citizens, many of whom own pitchforks.