Chinese consumers, worried about a loss of income during Covid-19 lockdowns, as well as their lingering fears about overall job security, are crimping China’s economic recovery.
Officials urging consumers to spend are concerned about people like Wu Lei, a soccer coach in Beijing who has put off buying a new mobile phone.
“I’ve lost the lion’s share of my income since Beijing called a stop to after-school sports clubs in April,” said Wu, a 37-year-old with two daughters.
The five-week-long near-shutdown of the Chinese capital under China’s stringent Covid-19 measures was eased on Monday. “We have no spare money even in normal months, so now we feel really under financial pressure,” he said.
China is moving to spur spending that was depressed by Covid-19 curbs in some of its biggest cities.
But piecemeal measures such as vouchers, subsidies for car buyers and digital yuan payments have been modest compared with other big global economies.
Policymakers have instead stuck to their preferred approach to stimulus, which focuses on businesses and infrastructure.
Those measures, analysts said, will not be enough to drive a recovery in consumer spending, which accounted for more than two-thirds of first-quarter growth in China’s economy.
Beijing is looking to domestic Chinese consumers as a driver, as the economy is rebalanced away from a heavy dependence on exports and investments.
That will, in turn, impede the strength of recovery in the world’s second-largest economy, a crucial engine of global growth.
“Chinese consumers are rattled,” said Mark Tanner, managing director at Shanghai-based research and marketing consultancy China Skinny.
“They are lacking confidence that they had before, partly due to the uncertainty around the highly transmissible Omicron being contained for long, but also as they are not feeling as good relative to other countries,” he said.
China’s retail sales shrank 11.1% in April from a year earlier, the biggest fall since the height of the first coronavirus outbreak two years ago that ravaged the city of Wuhan.
The rebound that followed then was robust for upmarket brands such as Louis Vuitton and Gucci, but wider consumption struggled. Retails sales for 2020 fell 3.9% from the previous year, the first contraction since 1968.
But the overall economy grew 2.2% in 2020, roaring back from a record slump in the first quarter and making China the only major world economy to expand.
This time, analysts said, the picture is murkier. China’s once high-flying property and tech sectors are wobbling and persistent job stresses have undercut Chinese consumers and their “revenge consumption” that typically follows when lockdowns ease up.
China’s urban jobless rate rose to 6.1% in April, the highest since February 2020 and well above the government’s target ceiling of 5.5%.
Some economists expect employment to worsen before it gets better, with graduates entering the workforce in record numbers.
- Reuters, with additional editing by George Russell