Babe wake up, new “at what cost” just dropped!

Yang is both a victim and perpetrator of this vicious cycle. With job prospects looking slim, she opened a cocktail stall earlier this year but had to close it just three months later. Discounts from food delivery platforms — drinks for a few cents — wiped her out. She considered going back to a factory job she had five years ago that used to pay about $980 a month, only to find it now pays just $630. With money tight, she spends $1.40 or less on meals, bought from the same delivery platforms that forced her out of competition. “I’ve become the kind of consumer who destroys businesses like mine,” she said.

Okay, seems reasonable I suppose. Wages are dropping along with dropping prices, I wonder if Bloomberg will pursue this thought further

The drop in prices is already weighing on company results. Recent filings show losses widening and margins thinning, with many firms citing weak demand and price wars. A Bloomberg News analysis of around 6,000 publicly traded Chinese companies points to a broad-based strain.

Oh yeah nevermind

The squeeze doesn’t stop at the balance sheet. It reaches paychecks — and loops back into demand. Erica Chen is a prime example. The 40-year old used to earn more than about $333,000 a year after taxes at a major internet firm in Beijing while her husband drew a comfortable salary from an international tech company. A second home brought in rental income while their 7-year-old son attended international school. Their three nannies kept the household humming — one to cook, one to clean, one to watch the child — a domestic payroll exceeding $49,000 a year.

Then came the layoffs. Chen’s entire team was cut as her company tried to stop the bleeding from price wars and sagging consumer demand. Her husband also lost his job. The family’s budget suddenly looked unsustainable. The nannies were dismissed, the private school dropped and she took on the cooking and cleaning herself.

You’re laughing. These poor people had to fire their three nannies and pull their kids out of a 14k a year private school, and you’re laughing.

Meanwhile, households have boosted their savings to the equivalent of around 110% of China’s gross domestic product last year, the highest ever, indicating consumers are expecting lower prices in the future and heightened economic uncertainty.

People having savings is bad, don’t they know they should be in debt?

Consider Guo Fang, a 38-year-old former tech worker in Shanghai. Not long ago, she and her husband made more than $281,000 a year, spent freely on designer shoes and five-star hotels, and rarely thought about money.

But after she left work to have a child in 2020, the safety net she thought she had unraveled. She wants to get back to work, but colleagues who once promised her a job to return to have since been laid off. Her husband, an engineer in the auto industry, now fears pay cuts as price wars ravage his company.

“We’ve cut some family trips this year as my husband feels more worried about his job,” she said. “When I book hotels now, I think about whether we should choose the cheaper one. That’s the first time in years that I started to think it’s better to cut some spending.”

We had to stay at the Best Western instead of the Ritz this year

Prolonged deflation would also be virtually unprecedented for a major economy since World War II, with the lone exception of Japan, which just this year escaped its own painful battle of over a decade of weak prices and deflation. It’ll also become harder for China to climb into high-income status sustainably, or to surpass the US in economic size. Years of rising incomes and property gains had fueled dreams of upward mobility, but now deflation is quietly hollowing out the confidence of China’s once-aspiring middle class.

As always, it comes back to the nebulous middle class. Who cares how many people are lifted out of poverty? The only freedom I care about is the freedom to open a small business