China also faces economic squeeze

By Quentin Sommerville
BBC News, Beijing

The stock market in China, as elsewhere, has taken a nosedive

The Chao Wai foodmarket is the kind of outdoor "wet" market that has been serving Beijingers for decades.

It is an old-fashioned affair. There are fresh noodles and vegetables on sale, and the shoppers here are a fairly traditional lot too - cautious spenders and careful savers.

"We keep our spending down," says the retired Ms Xu. "We don't dare to go to those shiny supermarkets, here things are much cheaper.

"Compared to five years ago, our living standard is improving. Although our salary is increasing, the price has gone up too. But in terms of food, it's still affordable."

China has had what it refers to as five golden years of economic prosperity, and ever so slowly this country of farmers and factory workers is becoming something else - a nation of shoppers.

The Village is Beijing's latest shopping mall. Despite the rustic sounding name, there are no fresh vegetables or noodles on sale here.

I have lots of confidence in China's economy... The population of China is much bigger than the America. It is a huge market Wang Li, finance worker

It looks like a supertanker of American consumerism has run aground in the city. There's Nike, Apple computer and Levi's stores, and the smell of Starbucks coffee hangs in the air.

Once China just manufactured the computers, iPods and training shoes on sale here - now Chinese people can afford to buy them too.

Hu Shijie, works in IT and is visiting the Apple store to buy a new computer.

"Although the economic crisis is hurting other countries, for China I can't see there is a big impact. The stock market hasn't changed a lot compared to several years ago. It has plunged 70%; that's just a return to where it was before," she said.

Wang Li, who works in the finance industry, is similarly upbeat.

"I have lots of confidence in China's economy. Investors from other countries think China is a very good business destination. The population of China is much bigger than the America. It is a huge market," he said.

Ferraris and farmers

It is these cocky new domestic consumers that the government hopes will keep China powering along - even if American and European shoppers stop spending.

There are certainly more of them, but how do Chinese wallets compare with those of the United States?

The vast majority of Chinese people still cannot afford luxuries

"Chinese wallets are getting bigger, but the scale is just hugely different. In China you've got an [annual] income on average of £1,000 ($1,700), whereas in America you've got an income of £15,000 ($25,000)," said Stephen Green, senior economist at Standard Chartered Bank in Shanghai.

"This is still a developing country. Although there are lots of Ferraris and Porsches floating around Shanghai and Beijing, they're not in the interior, where most of the people live. Most people still live on farms or small houses," he added.

Export growth is slowing, but so too are things at home.

Retail sales remain strong, but many economists do not believe the numbers.

On the mainland, car sales, house prices and the stock market have all taken a dive. Even the purchase of domestic air tickets is down - all signs of weaker consumer confidence.

And according to Cheng Siwei, a political and economic adviser to China's government, this superfast economy is shifting down a gear.

"This year, because of the internal and external challenges, China's economic growth is going to slow down a little bit, to around 10%. In the coming three years, we can keep our economic growth rate above 8%," he said.

But that might be optimistic. China's shops are busier than ever, but its factories are slowing down, and jobs are already being lost.

Even here, there will be no escaping the global economic chill.