![\"Cao](\"https:\/\/ichef.bbci.co.uk\/news\/624\/cpsprodpb\/3F7A\/production\/_105205261_de02.jpg\")
Nationally, 2018 was a very hard year for the car industry in China, the world’s biggest car market.<\/p>\n\n\n\n
Just over 22 million new cars were sold last year.<\/a> But that’s a near 6% drop on 2017. The first fall in two decades.<\/p>\n\n\n\n Inside Mr Cao’s Cadillac showroom various models are side by side. An SUV at the back has a canoe on its roof rack.ADVERTISEMENT<\/p>\n\n\n\n I watched a group of three youngish men come in and sit down for the sales treatment. They didn’t buy.<\/p>\n\n\n\n They didn’t even have a good look inside the cars. Mr Cao thinks the main reason is a tax cut that has gone away.<\/p>\n\n\n\n “In 2018 the government cancelled the tax subsidy on car purchases, which was a shock to us,” he says.<\/p>\n\n\n\n This benefit has been gradually wound down. Others think a credit squeeze has caused the demand for cars to drop.<\/p>\n\n\n\n After a decade of near doubling its debt – to almost 300% of China’s GDP – 2018 was the year that the government tried to deal with the aftermath of a credit crisis.<\/a>That crisis was centred on peer-to-peer lending, known as P2P.<\/p>\n\n\n\n P2P lenders offer loans to individuals from a pool of funds supplied by other individuals and other businesses, thereby cutting out banks.<\/p>\n\n\n\n Economist Andy Xie says the previously increasing national debt kept demand high, particularly in the property and car sectors.<\/p>\n\n\n\n “Now the property market has tipped over, and it’s affecting a lot of things,” he says.<\/p>\n\n\n\n So why is property so important?<\/p>\n\n\n\n “Auto sales are highly correlated to property sales,” Mr Xie says.<\/p>\n\n\n\n “When people buy property it seems they buy a car at the same time. So when the property market is not doing well the auto demand is down.”<\/p>\n\n\n\n The collapse of many of the P2P lending platforms is thought to have had a significant impact on both house and car sales, because borrowed money was being used as down payments for both.<\/p>\n\n\n\n Mr Xie says the credit system “used to be lubricated by these guys” and suddenly that has stopped.<\/p>\n\n\n\n “They lent to people who could not pay back. [Borrowers] shifted their debt from one platform to another.”<\/p>\n\n\n\n He tells me he’s heard statistics suggesting one in four such borrowers “have no ability to pay back”.<\/p>\n\n\n\n China’s car industry is also a key driver of industrial output and a barometer of consumer demand.<\/p>\n\n\n\n But growth in China’s economy is slowing, and the trade war with the US is starting to bite. Retail sales have slowed to a pace not seen for more than a decade.<\/p>\n\n\n\n A couple of hours away from the car dealership is a tiny hair salon, in the heart of Shanghai’s old west side.<\/p>\n\n\n\n Sun Qiang is the owner and haircutter-in-chief. For a few hours I sat and watched him deal with a handful of customers. First up were three women, two of whom had curlers in, and didn’t look happy to be there.<\/p>\n\n\n\n He told me he’d cut my hair for 40 yuan ($6; \u00a34.50). His place is at the bottom end of what you might call the barometer of China’s consumption.<\/p>\n\n\n\n But business isn’t dropping off. He is, though, a barber who also cuts women’s hair.<\/p>\n\n\n\n When it comes to cars he’d like a Chinese brand SUV. But it’s not likely any time soon. He doesn’t live that far from work and the buses are good. Plus he doesn’t want to borrow.<\/p>\n\n\n\n “I think some car dealers, they want to boost their sales, so they need such consumers who love to pay by loans,” he explains.<\/p>\n\n\n\n “But as a traditional Chinese person, I think we should only buy stuff that we can afford.”<\/p>\n\n\n\n People like Mr Sun are the other problem for China as it contemplates a slowing economy. He is in his mid-40s and has what you might call the traditional Chinese attitude towards borrowing.<\/p>\n\n\n\n He says he’s worried about mounting healthcare costs and other possible “emergencies”.<\/p>\n\n\n\n “Medical care and education costs us a lot,” he says. “That’s why we have to save money.”<\/p>\n\n\n\n Just outside the hair salon is a scene of China’s changing economy.<\/p>\n\n\n\n Demand may have tanked, but there are still plenty of cars on the streets. Next door is a boutique shop selling high-end women’s clothes. There’s a pair of Louboutin high heels in the window.<\/p>\n\n\n\n Just down the street I watched as two female construction workers, with their yellow hard hats on, took down some bamboo scaffolding.<\/p>\n\n\n\n China is trying to move from an economy dependent on public investment and exports to domestic consumption.<\/p>\n\n\n\n But that transition has taken a knock.<\/p>\n\n\n\n The slowdown is here. China’s car dealers and hairdressers know it. So do this country’s leaders.<\/p>\n","protected":false},"excerpt":{"rendered":" If you’re selling Cadillacs in China, it helps that the US president is driven around in one. Cao Chenyi, the boss of a Cadillac dealership near Shanghai, told me that customers know that Donald Trump’s presidential limousine is made by the US carmaker. He says they like the prestige. But Mr Cao’s had a bad year. Demand dropped 30% in… Read more »<\/a><\/p>\n","protected":false},"author":76,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[119],"class_list":["post-2931","post","type-post","status-publish","format-standard","hentry","category-article","tag-bbc-news"],"_links":{"self":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts\/2931","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/users\/76"}],"replies":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/comments?post=2931"}],"version-history":[{"count":1,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts\/2931\/revisions"}],"predecessor-version":[{"id":2932,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts\/2931\/revisions\/2932"}],"wp:attachment":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/media?parent=2931"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/categories?post=2931"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/tags?post=2931"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"Cao](\"https:\/\/ichef.bbci.co.uk\/news\/624\/cpsprodpb\/86C4\/production\/_105200543_chinaautoeconomycao_chenyi2.jpg\")
Cars and houses<\/h2>\n\n\n\n
![\"A](\"https:\/\/ichef.bbci.co.uk\/news\/624\/cpsprodpb\/1158\/production\/_105204440_gettyimages-1004174484.jpg\")
Slowing economy<\/h2>\n\n\n\n
![\"Sun](\"https:\/\/ichef.bbci.co.uk\/news\/624\/cpsprodpb\/5706\/production\/_105187222_chinaautoeconomysun_qiang2.jpg\")
\n\n\n\n
\n\n\n\nTraditional attitudes<\/h2>\n\n\n\n
![\"New](\"https:\/\/ichef.bbci.co.uk\/news\/624\/cpsprodpb\/8688\/production\/_105204443_gettyimages-843556534.jpg\")