China Ventures Into the Night Economy in Latest Quest for Growth

(Bloomberg) --

In mid July, hotel worker Bob Ji got an unusual request: he and his colleagues were to take shifts manning a beer and snack stall in a public square near the five-star establishment in Beijing’s financial district.

His assignment was part of a push by the local government to help invigorate the night economy in a part of the city usually abandoned after the work day ends. Judging by the empty tables at 8 p.m. on a recent Tuesday evening, the district’s campaign isn’t taking off.

“People probably prefer to go home after work. Most young people live far away, it’s so expensive to live near here,” Ji said as he tended to two lonely customers. Only the hottest summer evenings have so far managed to attract larger after-work crowds.

The lackluster results for the pop-up bar -- meant to mimic the bustling street vendors that have been regulated out of existence over the years -- underscores the difficulties in boosting consumption. Retail sales are growing faster than the overall economy and private spending is becoming a larger part of GDP, but a collapse in car sales is one sign that people are unwilling to dramatically boost spending, especially with food prices rising quickly.

“The night-time economy is a catchy concept and it might give consumption a short-term shot in the arm, especially as the government is putting its weight behind the initiative,” said Diana Choyleva, chief economist at London-based Enodo Economics. “But it’s not going to have any long-term meaningful impact,” she said, noting that the main impediment to higher spending is a lack of income.

It may be too early to judge: Beijing is known to have a less active nightlife than other cities, so the campaign may have a higher chance of success elsewhere.

Chengdu, a city in the country’s southwest, brought in travel journalists and bloggers this week to experience the city’s tourist attractions, including boating on the Jinjiang river and feasting on spicy Sichuan cuisine in the Taikoo Li shopping district. For its own residents, the city is extending opening hours for zoos, circuses, galleries, and beauty parlors.

The country’s consumers face headwinds that go beyond the effects from trade tensions with the U.S., as rising household debt, higher property prices, and accelerating inflation -- especially in pork and other foods -- are biting into people’s wallets. The government has tried to ease the pain through multiple channels, including personal income tax cuts, but some economists estimate that Chinese households are squirreling more money away as sentiment worsens.

Policies to stimulate night-time business in urban areas -- such as Beijing, Shanghai, Nanjing and Chengdu -- include extending hours for public transport, parks, museums, and shopping malls. Officials have also been appointed to oversee activities after dark, mirroring practices in Western metropolises like London or New York.

However, the state-led approach to street food limits the options vendors have for luring customers. While stalls selling fragrant roasted lamb skewers used to speckle Beijing’s side streets, stricter regulations now mean workers like Ji can’t cook on site or use knives. That means he can only sell finger foods like chips and German sausages that have been lying around for hours.

Limited Demand

There was a similarly subdued picture in Qianmen, another part of Beijing targeted by the government’s campaign. A shop assistant in a swanky 24-hour bookstore near Tiananmen Square said that while a few people do enter to look around, customers rarely buy anything in the evening.

A survey conducted last month by recruiting website Zhaopin.com and food delivery company Meituan Dianping showed that Chinese southern cities slightly outperform northern peers in terms of night-time consumption. But overall, the potential to create a lively night economy is limited. Almost three quarters of respondents said they spend less than 200 yuan ($28) in the evenings.

Other major cities have also turned to the night economy to boost spending. London Mayor Sadiq Khan formed a Night Time Commission, which said overnight visitors spent 16.2 billion pounds ($20 billion) in the city in 2017. Tokyo said in June it would start giving out billions of yen in grants to boost night-time tourism. New York’s nightlife generated $35.1 billion in economic output in 2016, according to a city report.

With China mired in a trade war with the U.S. and facing a structural challenges to growth at home, consumption has never been a more crucial driver of the economy. But even if this latest push to stimulate the night economy is successful, it still wouldn’t pack the same immediate punch as building roads, railways and bridges.

“Consumption is unlike infrastructure investment, from which the stimulus effect could materialize very quickly,” said Fan Ruoying, a researcher at Bank of China’s Research Institute in Beijing. Policies including tax cuts on individual income should mean that “slowly consumption will be able to gain from those measures.”

To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net;Carolynn Look in Beijing at clook4@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, ;Rachel Chang at wchang98@bloomberg.net, James Mayger, Sharon Chen

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With assistance from Bloomberg