Consumer spending is, without a doubt, one of the backbones of American culture. In the United States, it’s often impossible to go even one day without buying something, whether it’s purchasing a simple pack of gum or dropping some serious cash on a brand-new car. With these everyday, but vital, contributors to the United States’ economy in mind, it’s no wonder that consumer spending is one of the most important economic indicators for the U.S., accounting for about two-thirds of the U.S. economy. More specifically, retail sales (often the most common picture of consumerism) cover 40 percent of consumer spending. Given the seasonal nature of retail, sales reports are released on a monthly basis to be compared to that same month of a previous year. So yes, one could say that the holiday season and exchanging presents are not just about good will to all, considering sales made during that time are an especially strong indicator of how well (or how poorly) the U.S. economy is doing.

Additionally, it is important to note that, naturally, retail sales directly reflect consumers’ wealth and confidence in the economy. The more household incomes increase and stock prices rise, the wealthier people feel, which inclines them to spend more. If consumers are economically insecure about the future, they will spend less. To best illustrate this concept, let’s briefly look at consumer spending before and during the Great Recession of 2008.

On Oct. 25, 2011, The Economist published an article titled “Hard times: How the economic slowdown has changed consumer spending in America.” Given the year, 2011, the piece was written as the United States was attempting to climb from the depths of the crash that began in 2008, and the above graph depicts how resulting consumer spending changed between 2007 and 2010.

Personally, I was still in late elementary school when the crash occurred, and I distinctly remember that the recession did not hit my family hard until 2011 when my father was laid off from his full time job. As the graph communicates, the recession led to an overall decrease in consumer spending by the nation, and I definitely remember that my family had to reduce our spending, too. Now that I’m studying the topic years later with a more mature perspective, it’s interesting to see how my family’s decreased spending habits at the time reflected those of the nation as a whole, which is something my 11-year-old self could not process.

Most notably, the article points out how consumer spending had changed at large, writing, “Between 2007 and 2010, average annual consumer spending per unit—defined as a family/shared household or single/financially independent person—fell by 3.1% to $48,109. Average prices over this period have risen by 5.2%, so real consumer spending has fallen by almost 8%.” The article then compares these spending habits to those of the “peak years” of 2003-2006, stating that consumer spending actually rose by 8.2 percent during that time. Consequently, recession years brought less spending on luxuries like sugar and nicotine, whereas the earlier prosperous years saw an increase in spending on non-necessities, namely household goods and alcohol, by 13 percent and 19 percent, respectively.

Simply put, as depicted by this short sliver of time that had such a drastic, historic impact on the U.S. economy, when consumers aren’t spending, it’s not because they’ve lost interest in American consumerism; rather, decreased consumer spending indicates a much larger problem within the grander economic landscape. After all, America is nothing without its consumer goods, so a thriving economy is the best way to keep America and it’s (morally conflicting) consumerist values alive and well.

SOURCES:

https://www.economist.com/graphic-detail/2011/10/25/hard-times

Greg IP. The Little Book of Economics

Terri Thompson. Writing About Business

Recently, two academics from China’s universities proposed to tax all working adults under 40 to build a “reproduction fund”. The proposal aims at alleviating the costs of childbirth and raising fertility. When families give birth to the second child, they could withdraw money from the fund. However, those couples who don’t have the second child cannot withdraw any money until they are retired.

For decades, China has restrictively controlled the number of babies women could have. The one-child policy has been requiring families to have only a child. Those women who violate the policy will be forced to stop pregnancy and undergo sterilization operations by the country’s “family planning” offices. But decades later, the one-child policy has caused a looming demographic crisis that officials begin to realize that it could imperil economic growth and to be anxious for a baby boom.

The one-child policy was eased three years ago. But the damage to China’s population growth had been done and the fertility willingness could not be rebounded anymore. Now the country is dealing with a demographic time bomb, which features an increase in the number of elderly people and a falling birth rate.

As of 2017, people aged 60 and above accounted for about 16.2 percent of China’s population, compared to 7.4 percent in 1950, according to the UN Population Division. The global percentage of people over 60 sits at 12.7 percent. Also, according to the State Council, the population is graying quickly. about a quarter of China’s population will be 60 or older by 2030, up from 13.3 percent in the 2010 census.

The increasing number of aging population means more retirement pension should be provided for the increasing number of retirees. However, China faces a widening shortfall of the financial support. In 2017, China’s pension funds collected 3.3 trillion yuan ($515 billion) and handed out 2.9 trillion yuan in payments. According to Reuters, thirteen pension funds in regions and administrative units around China can only cover less than one year’s worth of pensions.

Moreover, ending China’s decades-old one-child policy has not raised birth rates as high living costs deter larger families. As Bloomberg notes, “High living costs, long work hours and surging child-care expenses mean that many couples feel that they can only afford to have one child — or none.” Although the number of births in China did welcome a rise of nearly 8 percent in 2016 after the government eased one-child policy and allowed a two-child policy in 2015, the rise did not last long and the number of births then fell 3.5 percent in 2017, from 18.5 million in 2016 to 17.2 million.

This does not bode well for China’s economic growth. During the past four decades, China has enjoyed its demographic dividend to boost the economy. With one-child policy, China artificially adjusted its demographic structure to a good one with the ratio of those too old or too young to work to the working-age population dropping below 50 percent. But these days are over. Now, China is still finding a way to regain demographic dividend with its population anxiety.

For many, August symbolizes beginnings. The hottest month brings a new school year and the long-awaited season of fall. One might think that these changes would encourage people to go shopping and buy new things, but this year, that is not the case. Consumer confidence hit an 11-month low in the United States. But what does that mean, exactly?

Consumer confidence is based on several factors. Each month, the American Conference Board surveys 5000 households to measure how optimistic or pessimistic consumers feel about the economy’s current and future performance. This is a leading economic indicator because if citizens believe that the economy is going to do well, they will want to purchase more, regardless of whether it’s smart to do so or not.

Earlier this month, the University of Michigan released that total sentiment fell to an 11-month low. The study revealed that the consumer confidence index (CCI) score fell from 97.9 in July to 95.3 in August, Reuters reports. This is how they got this number:

The CCI survey features a series of questions asking if the individual feels positive, negative, or neutral about the current and future economy. 40% of the questions concern the current economy, while 60% concern the future. Then, the Conference Board puts the responses into numbers by taking the amount of positive responses divided by the positive and negative responses combined. The scores are then averaged, and then compared to a benchmark value of 100.

This sounds complicated, but essentially it’s just an algorithm that quantifies consumer confidence.

The CCI is key because manufacturers use it to determine how much of their products they should produce. For example, if Apple sees that consumers are extremely confident this month, they might hire more factory workers to anticipate a boom in MacBook sales. This is a smart way for business to stay ahead of the supply and demand curve.

Economists, however, consider the CCI a lagging indicator, meaning it fluctuates after the economy changes, not before. In reality, though, if people think the economy is doing great and spend a lot of money, then in turn it will do great. Americans have the power to boost their economic futures by simply staying positive, but they tend to be pessimists. Current events seriously affect their outlook.

For example, the decline in CCI this month stemmed from the bottom third of the economy believing that this is a terrible time to buy large goods. This roots from an increased inflation rate over the past few months. Politics also play into sentiments, as the Trump administration’s protectionist trade policy has led Americans to believe that import duties will continue to rise.

Though consumer confidence is falling, one thing is for certain– it will rise again. The economy rises and falls every single day. Congress is constantly pushing new economic legislation. Changing weather conditions determine the price of goods. Trends lead people to buy certain things and not others. While it is scary to not know what the future holds, it can also be comforting.

SOURCES:

https://www.youtube.com/watch?v=YtT0cO9038E

https://tradingeconomics.com/united-states/consumer-confidence

A significant part of the justification behind Donald Trump’s recent trade war with China lies in his supposed rapport with the American White working class, specifically those who come from the manufacturing, farming, and mining sector. He repeatedly makes the claim that the outsourcing of jobs and the stealing of U.S intellectual property by countries like China has taken away “millions and millions” of jobs, costing us “billions”. Hence, taxing foreign imports would encourage American industries to “buy and invest local.” The U.S trade deficit plays a huge role in this. China is screwing us, Trump claims, and stealing “500 billion dollars” from our economy.

But if it were really the case that massive trade imbalance harms the economy, then it would follow that at the very least an increase or decrease in the trade deficit would correlate with an increase or decrease in unemployment rates.

The unemployment rate measures individuals who are willing and available to work or are actively seeking work. Those working part-time are considered employed. The trade deficit measures the difference between a country’s net exports (goods leaving the country) and net imports (goods coming into the country).

Compare and contrast, then, U.S trade balance and the unemployment rate since 1980, according to the U.S Bureau of Labor Statistics:

The above graphs of course paint a very complicated picture of the effects of trade balances on employment rate. While the periods between 1981 and 1986-86, and 1988 and 1992-3, saw a slight correlation between rising unemployment and an increasing trade deficit, the period between 1995 and 2000 saw the opposite: there was a huge decrease in unemployment despite a massive widening of the trade deficit. In fact, sometimes it is even the case that decreasing trade deficits correlate with rising unemployment, as is demonstrated by the 2008-2010 period.

So if Trump wants to cause a trade war, he’d best provide another justification, as job losses don’t seem to have much to do with trade imbalances. It also weakens his NAFTA argument—that NAFTA is one of the main culprits in the massive outsourcing of jobs to Mexico. Since the act’s passing in 1993 until the Dot-Com Bubble, employment had actually decreased from about 7% to 4%. So there you have it: “they”—those malevolent, rapacious, cheating foreigners—are not taking away our jobs. The question then remains as to why Trump continues to wage this ridiculous trade war with China, even when it actually hurts American workers.

For some Chinese students studying in the United States, a lot of Hollywood movies might not be accessible for them to watch in movie theaters, if they decide to go back home for vacations. Spider-Man: Homecoming, for example, was released in the United States on June 28, 2017, while the release date for this film in China was September 8, 2017. Thus, for Chinese international students who went back home for summer vacation in May and return back to America in September, they might miss screening period in both countries. Such over two months delay is referred as the practice of Hollywood blackout in Chinese film market, or Chinese domestic film protection months.

[The history of Hollywood blackout period]

The Chinese government has never released any written document to acknowledge the official existence of this Hollywood blackout months, and even in 2012, the Vice Director of Chinese State Administration of Radio, Film, and Television Jin Tian denied in an interview that the Chinese government has even intentionally protected its film industry. Tian said the film market in China is free and is determined by consumers’ demand. However, ChinaDaily,NetEase Entertainment, and PeopleDaily all traced the idea of Hollywood blackout back to 2004. When Chinese movie House of Flying Daggers was released in July of 2004, the Chinese State Administration of Radio, Film, and Television gave an oral order to all Chinese theaters that while House of Flying Daggers was on screen, no Hollywood movies were allowed to compete against. The Spider Man 2 and Shrek 2 both got pushed off release date in China. The order worked effectively, as House of Flying Daggers garnished $92.8 million, which was the second highest box office in China that year and the highest box office for domestic movie in China that year. It also broke the record of the highest box office for Chinese domestic movie. In an interview conducted by Sina Entertainment, The Director of Chinese State Administration of Radio, Film, and Television Gang Tong praised the marketing operation of House of Flying Daggers. He said, “this model helped Chinese domestic film industry.”

Consequently, such model has kept since then and became so-called Hollywood blackout since Hollywood movies are major component of Chinese imported movies. According to ChinaDaily and NetEase Entertainment, aiming to support Chinese domestic film industry, during summer vacation (June to August), Spring Festival, and National Day holiday week, Chinese government discourages theaters to put on foreign movies, especially Hollywood blockbusters, to compete against domestically made Chinese movies. The term “Chinese domestic film protection months” was created by media and film industry, not an official term.

[How has Hollywood Blackout performed in China]

The Hollywood Blackout has been active in Chinese film industry for twelve years so far.

The Hollywood Blackout did help Chinese movies such as Aftershock and The Founding of a Party to end with an impressive box office.

BUT has Chinese domestic film industry as a whole enjoyed the protection and improved since then?

Not really.

According to Hollywood Reporter, since 2012, the Chinese government only allows 34 imported movies on screen each year. In addition to this quote and the Hollywood Blackout, the Chinese government also has applied strategies such as putting big name Hollywood movies at same period; thus, they are in head-to-head battles to decrease Hollywood movies’ box office.

According to Shenzhen Daily, the Hollywood Blackout also resulted a negative competition environment for Hollywood movies since all delayed American movies will massively emerge on theater at the end of August. Shenzhen Daily said Warner Brothers tried to contact China Film Group, a State-owned enterprise which is the only government-authorized importer of foreign films, to delay the opening of “The Dark Knight Rises” to late September, so it would not combat with its another movie “The Amazing Spider-Man” at same period. The Chinese government did not agree. They were both released on September 3rd. They both harmed each other’s box office.

Here is the Chinese release date of movies from June to August. The blue dots represent foreign movies, while the yellow dots represent Chinese domestic movies. Clearly, from June to August, there were much more domestic movies than foreign movies on screen. However, the above graphic also indicates that the Hollywood Blackout is not strict as it stated. In July 2013, for example, there was still a lot of foreign movies. BUT Soho Entertainment argues that most of these foreign movies during “Hollywood Blackout period” are not competitive Hollywood movies.

Did Chinese domestic film industry experience a boom during Hollywood Blackout?

The statistics above presents the film row piece rate and percentage of box office for domestic movies and foreign movies during Hollywood Blackout. The film row piece rate indicates the rate of screening of a film in cinemas within a specified time period, which is calculated by dividing the number of screenings of a film in cinemas within a specified time period by the total number of film screenings in cinemas within the same period. The above chart clearly tells that even the film row piece rate of Chinese domestic movies is generally 3-4 times that of foreign imported movies during Hollywood Blackout period, the foreign movies still could share box office half and half with Chinese domestic movies. The only exception is 2015, which was a clear winning case for Chinese domestic movies, but that momentum did not keep in 2016.

Here is a direct comparison of box office between domestic movies and imported movies during Hollywood Blackout Period. Again, 2015 is the only year that domestic movies took significant advantage.

[What Happened in 2015?]

There was a clearly huge boom of Chinese domestic film industry in terms of box office. What happened in 2015? Is this year an isolated case?

According to CGTN, CCTV English Channel, a growing size of middle class and an expansion of cinema infrastructure contribute to this boom of Chinese film industry.  According to the State Administration for Press Publishing Radio Film and Television (SAPPRFT), “A total of 8,035 screens were installed in 2015 — a rate of 22 screens erected every day. China’s screen count currently sits at 31,627, while the number in North America is estimated at around 39,000.”

In an interview with Deputy Chairman of the Shanghai Film Association Shi Chuan, he said since more theaters and screens were built in smaller cities, more audience could go to cinemas. Furthermore, there was indeed a growing trend of the quality and diversity of Chinese domestic movies, according to Hollywood Reporter.Monkey King: Hero is Back, a 3D animated film based on a beloved classic Chinese story, received not only good looking in box office number but also a positive public review.

However, there was a huge controversy regarding to box office inflation, or even  it should be called fraud. Chinese movie Monster Hunt garnished RMB 2.43billion ($379m) in China and became the highest-grossing film not only during Hollywood Blackout period but also the highest in Chinese  history up to that year.Chinese state broadcaster CCTV addressed an issue that Monster Hunt might conduct box office fraud that many sold-out screenings were actually filled with empty seats. Later, the distributor of this movie, EDKO Film company, admitted that the company gave away RMB 40 million worth of tickets during the final 15 days of its run. In the past, it was a common practice for Chinese movie companies to offer “free welfare tickets” to young children, seniors, police, teachers and the disabled. However, film companies like EDKO took advantage of this welfare tickets and exploited this strategy in order to get their box office number higher.

When the record-breaking Monster Hunt hit in North America, it only got $468 per theater in the U.S., which was the lowest per-theater average of any new film that weekend.

Epoch Times published an article in 2015 that exposed some dirty truths of Chinese box office figures. The article also asserts that “an anonymous executive at a film distributor spoke to Sina about his involvement in a large-scale box office ticket purchase. The distributor had spent over 60 million yuan ($9.7 million) nationwide to boost one film.” Some companies also asked their partners and contributors to buy more tickets. The reason is that “even if the movie didn’t earn much money by the end, the high box office figure may already have created opportunities for the listed movie company on the stock market.” Moreover, the article said high box office in short period of time, like reaching 100 million by the third day, can soon attract media attention. The more media coverage could boost a movie’s competitiveness in the market since people tend to go to watch high-box-office movies.

Another unethical practice mentioned in the Epoch Times article is bribing theaters. In exchange, theaters arrange more showing time for their partners, increasing their sales. “According to the Sina report, profits are split 43/57 percent between the film distributor and the theater, respectively.”

[Has the quality of Chinese movies improved?]

Not much.

The above chart shows ratings of movies in China during Hollywood Blackout period. The source for rating is DouBan, which is a counterpart of Rotten Tomato in China. Larger dots represent more high screening percentage in theater. Chinese domestic movies with low ratings occupy large scale of screening time in theater. Chinese domestic movies with lower and lower ratings took larger and larger portion of Chinese screen, as the years went. In 2016, movies with 2+ ratings are the largest portion on screen while there was an empty whole for Chinese domestic movie with 8+ rating. It is not a healthy trend. The general public in China is disappointed by their domestic film products during Hollywood Blackout period.

In 2017, China Youth Daily published an article that criticized the effectiveness of Hollywood Blackout. The article first acknowledge the function of Hollywood Blackout that it helped Chinese film industry to claim dominance in the market, battling against Hollywood. It also saves time for Chinese film industry to grow, but the article also argues that current domestic film protection mechanism failed to either help small film business companies or boost high-quality movie products. It only created a domestic capital competition environment. The Chinese movie companies with largest capital won, not necessarily a victory for high quality movies. Consequently, Chinese audience tended to equalize Hollywood Blackout period as trashy movie period. They would wait to go to theaters after Hollywood Blackout. This contributes to the fall down of box office in 2016 during Hollywood Blackout.

[Recent Updates and How to Get Around it]

A good new for Hollywood. In 2016, due to a box office turndown, the Chinese government relaxed the quota for imported movies from 34 to 38. According to the Guardian the quota is set to keep expanding as part of trading deal between President Trump with Chinese President Xi.

Chinese audience is definitely a lucrative market for American film producers. The Fate of the Furious, for example, earned just $215 million stateside but collected $388 million at China’s box office.

2017 was a good year and also an interesting year for Chinese domestic movies during Hollywood blackout. Chinese movie Wolf-Warrior 2 grossed RMB5.68 billion($870 million). It defeated Chinese state-military propaganda movie The Founding of an Army. It shows that despite to the all regulation, Chinese audience are able to distinguish what is a better quality movie.

Felicia Chan, a senior lecturer at the University of Manchester said , “I’m not sure if ‘preventing too much Western influence’ is an argument any more at the Chinese box office, given the numbers Hollywood blockbusters are hitting in China … I suspect (the blackout) keeps the Chinese film industry buoyant, which then allows its players to have more negotiating power with Hollywood.”

There are two ways for American film producers to get around Hollywood Blackout.

The first one is to release the movie in May. The Hollywood Blackout only set restrictions that imported blockbusters are restricted to be premiered. However, American movies can get on screen in the mid of May prior to Hollywood Blackout period and can slip into June and July, which are hottest time for people to go to theaters. “Despicable Me 3”, for example released right before the blackout period, was the only Hollywood film on the top-grossing list of 2017.

The second way is to co-produce a movie with a Chinese film company. Then, it will not be considered as an imported movie during the Hollywood Blackout and also be exempted from the annual quota of imported movie.

The Great Depression. People waiting in line to eat for free. Source: http://reason.com/blog/2012/11/21/why-are-a-record-number-of-americans-on

The Great Depression was a scary time for America. A time full of poverty, hopelessness, fear, and especially, unemployment. Of course as economies tend to do, we were able to create stability, improve employment, increase hopefulness, and get through the Great Depression. We proved that we truly are the “land of the free and home of the brave,” emphasis on the brave. If we were able to get through the Great Depression, we could get through pretty much anything the economy threw at us, right? Wrong. Fast forward to the Great Recession of 2008 and it felt like, once again, that there was no hope. No hope for economic freedom, no hope for stability, no hope for anything. It felt how the photo to the left probably makes you feel. Millions of Americans lost their jobs, and the world was impacted by Wall Street “hotshots,” who thought they knew everything and simply would never lose the “game” of life. Well, life should never be a “game,” especially when that game ultimately affects millions of people. Case in point — ­­the housing crisis and the declared bankruptcy of the Lehman Brother’s. Wall Street was and is shady.