“Stock markets and real estate are down, almost all kinds of investments are shrinking, and no one wants to spend,” said Huo, a small business owner in Shenzhen, a high-tech hub in southern China.
“Why should I spend money when the economy is not doing well and everyone is worried about the future?” Spending more than just buying a few more pieces of clothing or jewelry You can not. ”
How China’s lottery boom reflects a ‘long and difficult’ economic recovery
How China’s lottery boom reflects a ‘long and difficult’ economic recovery
Official data supports Huo’s pessimism. According to the National Bureau of Statistics, real estate sales by floor space in the first 11 months of 2023 fell by 8% compared to the same period last year. Compared to 2019, the decline rate was more than 32%.
Retail sales rose 10.1% in November as the recovery continued following a disastrous second quarter, but this was mainly due to large-scale lockdowns in many cities under China’s strict zero-corona restrictions. This is because the standard of comparison for last year was low due to the
For Mr. Luo, also the owner of a textile and furniture export company in Shenzhen, there have been glimmers of hope in recent months. However, “It’s still early, [the rebound] It won’t happen soon, as it will take several months from the time you order to the time you receive the product,” Luo said.
Daniel Zipser, McKinsey’s senior partner in China, said he was cautiously optimistic about the outlook for the consumer market, but that sentiment was “near record lows.”
“The days of double-digit consumption growth in China are over,” he said. “At the same time, we’re seeing tremendous growth in terms of food service, restaurants, bars and entertainment, and we’re seeing significant growth in travel.”
According to the People’s Bank of China, national household savings increased by 17.8 trillion yuan (US$2.49 trillion) in 2022, and bank deposits increased by about 26.3 trillion yuan.
Economists said this was a hopeful sign that a return to confidence would give consumers more money. But the key question is when that will happen, and while it hasn’t happened yet, Zipser said he expects consumption to rebound slightly next year.
Yao Yao, a project manager in Shanghai, said that despite having a steady job and stable income, she had to be more careful with her spending. The 28-year-old said her social media platforms were flooded with posts about her job loss and desperate job search, fueling her anxiety.
“Even if I want to buy clothes, I hesitate because I actually have a lot of clothes in my wardrobe and don’t think I need something similar,” Yao says.
China’s urban unemployment rate has stabilized at around 5% in recent months, according to a survey. More than one in five people aged 16 to 24 was unemployed when the government stopped publishing age breakdowns in July.
A former director of a research institute affiliated with China’s top policy research institute pointed out the need to create a “virtuous cycle” in the economy.
“Consumption is not about emptying consumers’ pockets. What is more important is promoting the virtuous cycle between industrial development, employment growth, income growth, and consumption.” Wang Wei, former director of the Institute of Market Economy under the Development Research Center, spoke at an economic forum hosted by the Center for Economic Research. It was announced last week by Renmin University in Beijing.
“Unlocking consumption potential therefore requires support for manufacturing and service industries. At the same time, we need to create new and consumer industries based on new demand.”
Jeongmin Song, a partner at McKinsey Global Institute, also pointed out the importance of corporate trust.
“If businesses can identify market opportunities, it will increase investment and lead to a favorable job market. When consumers understand this trend, they will gain confidence, start spending, and so on. So we need to establish this virtuous cycle.”
China’s largest state-owned bank on Friday cut deposit rates again for the third time this year in a bid to stimulate consumption.
However, Xu Tiancheng, senior economist at the Economist Intelligence Unit, said the move was unlikely to have a major impact, saying: “Lowering the expected rate of return on deposits could encourage people to save more. “There is a possibility that it may even have the opposite effect.”
The EIU expects consumption to expand by 5.5% in real terms next year, meaning it will continue to outpace headline growth.
“However, it is unlikely that there will be a ‘big buzz’ for consumption next year,” Xu said. “The purchasing power of low-income households will increase as economic conditions improve. But before the rich and middle classes are mentally ready to spend more, leaders will need to seek widespread “confidence.” We must do our best to fill in the gaps. ”