Thread by @pretentiouswhat

Macroeconomy and society lessons from Yang the cab driver:

A casual chat with my driver in Nanning suddenly became insightful - I think it's worth sharing it here for those interested in Chinese consumption habits.

(Yes, yet another thread of cab driver wisdom)
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It's around 4pm and I'm heading to the airport. I call a Didi car and get a guy almost instantly, just 20 meters away. He looks about my age, maybe a bit younger.

"Hey man, you took my order so fast...do you just sit in the hotel parking lot waiting for an airport run?"

"No, I just dropped someone here. The system gives us orders. Hey, bro, are you Chinese?"

"Do I look Chinese?"

"Hah, no...I guess you don't. But you sound Chinese, like you're from the north."

"Yeah, I learned Chinese up north. But you...you sound like you're from Guangxi."

"Yes, you have a good ear. I'm from Nanning. Actually, originally I'm from Chongzuo. I guess you don't know Chongzuo...it's a small place."

"Actually I do know Chongzuo, but I don't know anything about it. It's a city southwest of here, on the Vietnam border, right?" (崇左市)

"Yes. Wow, you even know Chongzuo. Lots of Chinese people don't know Chongzuo."

"I like geography, and I like to travel, so sometimes I will study the map to plan where I might travel someday. I know lots of city names and locations like this. Hey, do you like driving for Didi?"

"It's okay. Actually I have two jobs - in the morning I work for a company, helping to ship orders."

"Like a logistics job?"

"Yeah, I guess it's a logistics job. In the late afternoon and evening, I drive a car for Didi."

"Why do you work two jobs? Are you saving for a house?"

"No, I already bought a house in Nanning. I work two jobs because it makes me feel more relaxed, to have the extra income."

"Why do you need the extra income? Are you paying your home loan faster?"

"Mmm...with extra income I pay my loan faster, but also can save some money."

"Save? For what? Do you plan to buy a car, go traveling, buy some stuff? Since you have a house already, what are you saving for? What's the dream thing you want to buy?"

"Dream? No...haha. I don't have a thing I want to buy. But I need to save for my daughter's education".

"Oh, you mean like tuition, training classes?"

"Not just that. Other things. Maybe someday she will be interested in dance or music. These hobbies cost money. It's different now than when we were young. Kids need other activities. So I need to save for that. Also my parents..."

"Right, saving for kids and and parents in the future. I see. You know, some economic experts say is that Chinese people are always saving for future purchases, so they don't buy goods now like cars or cell phones, a consumption problem. Do you think that's true?"

"Well, a few years ago, when I was younger, I liked to consume. I had no worry to spend a few thousand on a cell phone, or a few hundred at dinner. But it's different now, because the economy is not as good now, but also because I have a kid now. My consumption habit changed."

"...Actually my wife changed her consumption habit too, even more than me, so we can save more money. Now she won't even pay 30 CNY for makeup products..."

"Wow. How much money, what salary, do you think you need to make so that you wouldn't be afraid to consume things?"

"The problem for me is not how much...it's my earning model. When you get a big sum at the end of the month, it feels okay to spend it. But when you drive a car, the money comes slowly, one ride, one sum at a time. This is painful money to earn, so it also hurts to spend it."

"But also my way of thinking is different now. I won't consume the way I did when I was young. I just want to make enough to take care of my family, take care of my parents, have a relaxed life."

"How much money should someone make in Nanning to have this kind of relaxed life?"

He answer doesn't directly get at my question, but gives me lots of context clues:

"Well, in Nanning, college graduates working in an office (文员) can make only 3000. That's too little. But after a few years, with experience, maybe they can make 7000 or more. That's not bad.

"And then if you work in retail, restaurants, jobs like this, you should be able to make 5000. If you can do some physical jobs, like you can make 6000 or 7000, but also you have to work longer hours."

"Ok, so if you make, for example, 10000 per month, that's very comfortable?"

"Yes, 10000 is a good salary, but they are not comfortable. Because people that make 10000 have to work very hard, and maybe they don't make so much every month...more in some months, less in some months."

(His tone implies to me that he's not making this much).

Later, I checked hiring salary statistics for Nanning in Q2 2023 and found they matched well to his anecdotal descriptions, with the average monthly salary across the city at 8850 CNY and the median at 6985 CNY, ranking 28/38 of the largest Chinese cities.
163.com/dy/article/I9J…

"Okay" I continue. "Then what about real estate? Is it affordable in Nanning? I saw some signs advertising for 6000 to 8000/sqm for an apartment". Is that normal?"

"Yeah, Nanning is a typical 'wages low, house prices high' city. 7000/sqm is an average price".

(While Yang considers these prices high, a 1:1 ratio of the average monthly wage vs 1 sqm of housing is really not bad vs. say, Nanjing or Wuhan, where that ratio is 1:5 or more, never mind Beijing or Shanghai, where that ratio is 1:10 or even 1:20 in downtown areas).

"What's the most expensive real estate in Nanning? Someone told me it's those four big towers next to the Yong River? I guess it's famous?"

"Oh, haha yeah. It's called uhh...凯旋1号? It's very expensive. But that's not a nice place to live. The neighborhood isn't good."

"Yes, I saw those buildings at night across the river. I guess it's too expensive - someone told me it's 30000/sqm. Almost no lights. It seems it's still mostly empty, no neighbors. And when people do move in, there will be so much noise from renovations..."

(my photo)

"Maybe not. I heard those luxury apartments come fully furnished".

"Yes, but don't Chinese people always renovate the apartment when they move in?"

He pauses for a second, thinking, then laughs into the rearview mirror at me. "That's right...we do like to do that. Hahaha."

We're pulling up to the airport. But I still have one more question about real estate.

"Do you think the value of houses will go down because of the economy? Are you worried?"

"I heard that. I guess so. But I don't worry about it. I bought my house already. I won't sell it."

So...conclusions. ofc, Yang is just one guy, but his life seems pretty typical of a middle-income family in a large-but-not-huge Chinese city.

I'm not a macroecon guy, and definitely not a real estate guy, but here's what I got from this chat, in a social anthropology sense:

1. Even after buying a property, long-term considerations still drive Yang to save money, most prominently his daughter and parents.

2. Yang and his wife give up consumption in pursuit of their long-term goals, even working an extra job, to put away extra cash for those goals.

3. He associates loose/free consumption habits with youth and a lack of responsibility. His consumption today is strategic and intentional.

4. He is unperturbed by the prospect of real estate losing value, since he bought his house to live in, and doesn't intend to resell it.

These facts form the reality of how he consumes - sociocultural habits that make him distinct from a Shanghai consumer, an American consumer, or a generic consumer in an econ textbook.

If you want Yang to behave differently, your proposed policy solution must be fit for purpose.

Now, macro econ punditry is *not* my lane.

But if I hear a pundit talking about Chinese consumers, and how they will/won't behave in response to some government policy, I will always wonder what their mental model of this generic Chinese consumer's behavior looks like.

To be credible, that consumer behavior model should probably look like Yang, willing to work an extra job & skip consumption, not out of today's financial necessity, but in preparation of being a good filial son, and so his 3-year old daughter can take dance lessons someday.
-End

Following up on this point...7000/sqm might be normal for wherever Yang bought his house, but that's actually quite a bit lower than average prices for metro Nanning, which it appears are actually up at around 12,000/sqm currently (and declining) according to online data.

I checked the data later and found Nanning metro price is actually quite a bit higher than 7000/sqm - closer to 12000.

So that would be a monthly salary:sqm ratio of more like like 1 to 1.4-ish.

Still much better than any 1st or 2nd tier city though.

https://twitter.com/pretentiouswhat/status/1700817192244445407?s=20

Plug:

If you enjoy reading Chinese people's thoughts on society, life and the economy (via conversation with me) then you'll like my Subst@ck, which is full of that content.

Here's a post about the tourism economy in a rural Zhejiang village:

open.substack.com/pub/crossingth…