【Economic Perspectives】China Economy – The return of street vendors - CMB International Capital Corporation Limited

“Street vendor economy” to help revive the economy. Amid unprecedented employment pressures caused by the pandemic, China has turned to “street vendor economy” to boost the economy. This policy change was piloted by Chengdu city government in Mar 2020 and then promoted by Premier Li Keqiang during the “Two Sessions” in May. Several provinces and municipalities closely followed up afterward, allowing roadside booths, food stalls, mobile vendors in designated areas as long as the latter satisfy sanitary conditions and don’t interrupt traffic or local life.

Primary goal is to offer job support. We believe the intention of encouraging street vendors is primarily to expand job opportunities. The outbreak of COVID-19 took a toll on employment and household income growth. Low-income, low-skilled service sector employees and migrant workers are among the hardest hit populations according to our previous report (link). By YE18, 153 million people were employed in wholesale and retail sector. Street stalls and mobile vendors are therefore ideal for these displaced employees to become self-employed in a convenient and economically viable way. According to the local government, Chengdu has added over 100,000 job posts by allowing street businesses and mobile vendors.

A supplementary channel of retail sales. Street businesses take many forms and have unique strengths compared to other sales channels. To individuals, mobile vending is rent-free and flexible to adapt to customer demand. To existing brick-and-mortar stores and shopping malls, setting up open-air promotion stalls lower the risk of reinfection (which prohibits people from entering crowded malls or indoor places) and these stalls are located nearside traffic to access customers easily. We believe street vendors will complement existing sales channels and cater to diversified customer demand. However, we do not expect roadside businesses to replace or shuffle existing channel distribution of retailers.

Will street stands sweep across the nation? We think the decision should be made with caution by local governments. While night markets and street vendors are more or less in the blood of some cities (e.g. Chengdu), other cities may find that the push for street vendors may incur additional regulatory and social cost, and may interrupt existing urban and road infrastructures. Moreover, local authorities and city planners should consider how to revoke such decision if it is just meant to be a temporary move in abnormal times.

Call for all-rounded and city-specific measures to boost small businesses and employment. Every city is uniquely equipped with its own strengths and characteristics. Besides encouraging individuals to become street vendors, we believe there are other options to provide relief for small business owners and employees. For example, local government can urge temporary rent removal, cut fee & tax, or distribute coupons to encourage consumption at smaller shops. Supporting small business and alleviating employment pressures call for an all-rounded set of policy moves, among which “street vendors” is just one of the options.