Talking Point

Market indicators

Premier Li Keqiang pins hopes of a rebound on more street stalls

Market-Eiffel-w

A streetwise approach to stimulus: hawkers sell their wares from stalls in Hangzhou

Many cities around the world now offer tours of their street-food scene. Knowing that street food had turned into a tourism attraction, the Hong Kong government toyed with the idea of introducing food trucks a few years ago. The policy was reportedly inspired by the Hollywood movie Chef. The idea failed partly because the vehicles were only allowed to operate in a few designated spots (such as outside Hong Kong Disneyland). The pilot scheme floundered and most of the food truck pioneers went under.

Across the border in mainland China, Premier Li Keqiang last week offered his own backing to street vendors as part of a new policy initiative. The news soon stirred debate over the merits of the so-called “stall economy” and how it might generate more economic activity in general. Yet the craze withered away even more quickly than Hong Kong’s brief experiment. The media buzz about the plan only lasted a few days, with state newspapers suddenly going silent on the topic. What happened?

How did the debate start?

Chinese planners are working overtime on ways to reboot the world’s second biggest economy and help it recover from the Covid-19 outbreak. To that end Li announced last month during the Two Sessions, the annual gathering of China’s lawmakers and advisors, that his administration’s top priority this year is the creation of over 9 million urban jobs.

During the premier’s annual press conference – which traditionally takes place after the political gathering – he was asked by a reporter what the central government would do to help college graduates and rural migrant workers find work. This is a pressing concern. The unemployment rate climbed to 6% in April, although local analysts generally caution that the official data does not account for the employment situation among China’s huge army of migrant workers. Should they be included as well, the jobless rate could be as high as 20%.

Li noted that some 200 million Chinese are now working in the “gig economy” (ride-hailing drivers and delivery people, for instance) and that his administration would continue to lift “unwarranted restrictions” that prevent new roles from emerging. He also promised to help people who lose their jobs to find work again as soon as possible. “One may recall when young people returned to the cities from the countryside in large numbers in the early days of reform and opening-up, the opening of roadside tea stands helped to put many of them to work,” he added. “About two weeks ago, I saw in the news that a city in China’s western region, in keeping with local rules and regulations, set up 36,000 mobile stalls, adding some 100,000 new jobs overnight.”

Li was referring to Chengdu. According to Xinhua, the capital city of Sichuan province set up temporary stands for small vendors.

The move was applauded as effective in reviving domestic consumption, with more people coming out to eat. Xinhua added that more than 98% of Chengdu’s restaurants have resumed business since the Covid-19 outbreak waned in China.

Official media outlets made sure everyone understood the message that the Chinese premier was sending by reiterating his strong support for street vendors a few days later.

On an inspection tour of Yantai, a city in Shandong province, Li stopped on a busy street and chatted with a vendor selling local snacks. “The street stall and small store economy provides our worldly necessities. It is an important source of employment, just as much as bigger and high-end businesses,” he told an owner of another street stall. “China can only become stronger if its market, big corporates and small businesses can survive and develop together! We will give you guys support.”

With such a strong signal coming directly from the head of the Chinese cabinet, the term “stall economy” suddenly became the most discussed news items in the days that followed.

What were the initial responses to Li’s policy prompt?

More than 30 local governments were soon responding to Li’s call. Some said they would follow Chengdu’s example and make more public space available for hawkers. Others let shop owners move more of their wares onto pavements too.

One of the more audacious promotions came from Ruichang in Jiangxi province. In a government-sponsored video, the city’s chengguan, China’s unpopular urban management officials, and the nemesis of unlicenced hawkers (see WiC203), called on a vendor and invited him to resume business. The video attracted more than 3,500 comments within hours of being published.

Even some of the biggest cities were supportive of the idea. Shanghai said it was planning a number of new evening markets to promote local snacks and its “night economy”. In Beijing, a senior executive at a local business group told the Global Times that the stall economy could add up to three percentage points of GDP growth to the capital if six million new market stands were allowed this year.

A swarm of jokes and internet memes also started to make the rounds. KFC joined the social media craze by posting photos of a mobile stall that it had set up in Shenzhen to sell takeaway breakfasts. The fast food giant added it had plans to launch stalls in six other cities to sell ice cream.

Investors were feeling the buzz in the stock market as well. The share price of Wuling Automobile, a Hong Kong-listed joint venture between SAIC and General Motors, saw its market capitalisation nearly triple in as many days. Why? The firm makes a type of van that is well suited to a mobile food service. Other so-called “stall economy concept stocks” surged too, including the otherwise unloved Yindu Kitchen, which makes portable cooking utensils.

Why was the idea so intriguing to many Chinese?

For many older people, the sight of vendors setting up stalls on the street triggered their collective memory of the 1980s. The original “stall economy” fostered many successful firms. Many of the first generation of entrepreneurs honed their commercial acumen selling from street stalls. Huawei’s founder Ren Zhengfei started out in 1987 on a roadside stand in Shenzhen. Ren turned to selling telephone switches, Hong Kong Economic Times reported, after making his “first bucket of gold” selling weight-loss pills that year. Social media bloggers also recalled how Alibaba’s Jack Ma relied partly on income from selling socks and pants in his younger days.

That was the early stage of the reform era. Despite a limited supply of commercial goods, informal street markets sprung into life primarily because of the need to create jobs and drive economic growth.

As China’s economy began to gather pace, these smaller vendors were increasingly viewed as an urban malaise. Ridding the streets of hawkers deemed to be a nuisance became the key task of the chengguan, leading to nasty and even fatal confrontations.

More aggressive policing of municipal areas in this way has persisted for years. In fact, just a few weeks ago a number of local authorities embarked on new campaigns to clean up streets and markets (prompted by Covid-19 being first spotted in a wet market in Wuhan). As property prices have risen and urban districts have gentrified, vendors have been turfed out of longstanding spots in the streets. Bigger cities like Beijing have led the cleanout, evicting unlicenced vendors and clamping down on hawkers whose street stalls were deemed “uncivilised” (see WiC358).

How about the naysayers?

This context helps to explain why Li’s policy suggestion – favouring stalls – got so much attention. There was praise for the idea from media too. Southern Weekend thought it could prove to be a useful way of shoring up the job market, for instance. As street vendors typically pay little tax or rent, the creation of a ‘stall economy’ could be particularly effective in providing economic relief to people most in need, the newspaper added.

For others the government’s change of heart underlined the dire state of the Chinese economy. Some commentators doubted that the street vendors would have much impact in reviving consumption anyway, predicting that much of their business would be ‘stolen’ from more established shops and restaurants. Plenty of provincial officials were clearly unimpressed by the reversal in policy as well. Some of the most public opposition came from China’s capital city, when a WeChat account at Beijing Daily, a newspaper run by the Beijing city government, published an article insisting that the stall economy “does not suit Beijing”. Illegal street vendors have been a source of fake goods, noise pollution and traffic woes for years, it pointed out, and their return would compromise efforts to improve food hygiene and promote “a civilised society”.

A day later, the state broadcaster CCTV ran an opinion piece on its website that slammed major cities for “herding to” the stall economy model. “Those who see street vendors as the magical pill for economic revival are giving up a watermelon for one sesame grain,” the broadcaster suggested. “It is only a reflection of the incompetence of city planners.”

Some observers went as far as to suggest that the sudden criticism of the new policy by the likes of CCTV could point to another powerplay at the top of the Chinese leadership – noting that yet another proposal fromPremier Li was being snubbed by other Party cadres. Certainly, the sudden focus on street vendors doesn’t sit easily with more established themes championed by President Xi Jinping, like his vision of China as a high-tech superpower.

But while reports of a rift between Li and Xi have circulated for a while (see WiC241), it looks far-fetched that China’s most senior leaders would pick a major fight over street food. More likely is that the government is backtracking after local feedback. Local residents in Dalian have complained that their lives were already being affected just days after a night market was reopened, for instance. Photos had already gone viral on social media of roads strewn with rubbish and blocked by food stalls. “Behind the stall economy fervour, which lasted just a few days, what you could not see is the tears of four million street cleaners,” one widely forwarded WeChat article suggested.

“The future of China’s street vending lies in a scientific layout, standardised regulation, intelligent supervision and real-name registration,” the Global Times suggested, advocating a less free-wheeling approach than Li seemed to have suggested.

So Li’s campaign looks set to flounder?

This is not the first time that China’s premier has voiced his support for small businesses and street vendors. Back in April 2016, when he was chairing a meeting of the State Council, he was reported to be angry that some cities were forbidding farmers from bringing their watermelons into cities and selling them. Li lambasted the restrictions, describing them as “lazy governance”. Many cities had ended up as tidy but lifeless, the premier suggested.

How to find a balance between an orderly cityscape and a vibrant street economy? Unsurprisingly, Li’s administration has turned to some of China’s biggest tech firms for a digital solution. The State Council’s “Internet Plus Circulation Action Plan” – published in April 2016 – is designed to encourage e-commerce in rural areas. An essential plank of the policy is about unjamming bottlenecks in the cold-chain in rural areas so that farmers can sell their seasonal products to urban residents more easily.

Some of China’s largest firms are also pledging more help for street vendors and smaller shop owners. Alibaba and its main rival JD.com are offering microloans and other efforts to support street vendors. Suning, a major retailer, said it would support vendors in night markets by offering them free storage at 10,000 freezers in Carrefour and Suning convenience stores across the country. The company will also let these vendors use its livestreaming platform to sell their goods. The latter is yet another indication of how so many policy discussions in China these days end up flagging livestreaming – the e-commerce sales method that WiC has reported on extensively over the past year or so.

But behind the campaign there is also the reminder that millions of Chinese still struggle to make a good living. Li highlighted this himself in his Work Report to the National People’s Congress last month, pointing out that some 600 million Chinese earn a monthly income of only about Rmb1,000 ($140). That wasn’t enough to rent a room in many cities, he added.

Statistics like these sound more surprising amid talk of China’s crucial significance to the global economy, as well as its status as a new superpower and technology giant. But a few days later Li repeated the point in his chat with street vendors in Shandong, promising that the government’s focus on bringing an end to poverty was unrelenting. “The country is made up of the people,” he told them. “Only when the people are okay will the country be okay.”


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.