BEIJING — As U.S. and Chinese officials sit down for their first talks on tariffs in Geneva this weekend, China's tone remains defiant. It insists that the U.S. requested the talks, and that China will "never kneel" down to the Trump administration's economic coercion.
China's plan is to try to offset the tariffs and shrink external demand for its products by pumping up domestic demand. This week, it rolled out a major stimulus package that includes more subsidies to encourage consumer spending.
"With a 1% to 2% increase in Chinese households' consumption as a share of GDP, these can more than offset the impact of the tariffs imposed by President Trump," argues David Daokui Li, an economist at Tsinghua University in Beijing.
Li says China needs to build a stronger pension and healthcare system to inspire consumer confidence. But that's a long-term fix.
For now, Li says that China should aim to boost household consumption from its current 49% of GDP to around 51%.
The challenge of rebuilding consumer confidence
But Chinese consumers' wallets are not so easily pried open.
The government has been offering incentives to spur domestic consumption, including rebates on Chinese-made electric vehicles, and subsidies to trade in old goods and appliances like smart phones, air conditioners and refrigerators.
Officials say the inducements have been effective. Li says the rebates need to be more generous and the U.S. tariffs have spurred the government to act.
"Let me thank President Trump for giving a sense of urgency to our policymakers," he says.
Even before the U.S. imposed 145% tariffs on Chinese imports, and China retaliated with 125% levies on U.S. goods, China's economy was facing stiff headwinds.
China's GDP growth has slowed. The property sector, which accounts for 70% of China's household wealth, suffered a jarring correction. Youth unemployment has remained stubbornly high.
There are signs of belt-tightening abound on Chinese city streets, where diners pack restaurants offering 40 cent breakfasts, and stores hold flash sales and wage price wars with competitors.
Tightened purse strings, lowered expectations
Shanghai resident Jasmine Zhan is one of many consumers who has experienced a trend Chinese call a "consumption downgrade." For Zhan, it means she thinks before she spends.
"Now I think, 'how long can I use this thing. Is there anything at home that I can substitute for it,'" she says. "Do I really have to buy it?"
For more than a decade after graduating from college, Zhan earned a Chinese middle-class salary of around $34,000 a year, working as a landscape designer.
But about three years ago, China's economic landscape turned bleak, especially the real estate sector, which made up most of Zhan's clients.
So instead of getting a new cell phone, she got a new battery for her old one. She says her friend suggested they spend around $1,000 to go on a vacation inside China. Normally, she'd say yes.
"But this time I refused," she explains. "I said that in my current situation, even though I can afford it, I don't know what the future holds, so I want to put it on hold for now. I want to at least have a stable job or some free time before I go."
Before the trade war, Zhan says she savored fancy lunches, teas and coffees. Now, she's moved behind the espresso machine, working up to 12 hours a day as a barista.
From thriving to surviving
For the time being, Zhan does not expect to make as much money as she used to, or work nine-to-five. She says realizes she can still be happy with less shopping and dining.
When she's with friends, she says, "what we talk about most is not how we live, but just how we survive."
Wang Zitong, a 26-year-old hospital nurse in Beijing, shares some of Zhan's views.
We found her at Luckin Coffee, the country's largest coffee chain, where a cup of coffee costs about half the price at Starbucks.
Wang says she cut her weekly spending by about a 25%, but she is upbeat about China's economic future.
"No matter how much you spend," she says, "as long as you can maintain your average quality of life, you shouldn't consider it as a consumption downgrade."
Wang says she now spends less on food and toys for her cat.
And she wants to buy gold, a popular investment for many Chinese in uncertain times.
NPR's Cao Aowen contributed to this report in Beijing and Shanghai
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