Understanding the Factors Behind Chinese Consumers’ Negative Sentiment
China’s economic growth heavily relies on consumer spending, but Chinese households are showing reluctance to participate. The state of Chinese consumers is a significant issue that goes beyond the well-publicized property crisis. While Beijing has expressed the need to shift the economy’s focus towards consumer spending, previous policies and economic emphases have hindered this transition.
Chinese consumers are not just reluctant to spend; they are experiencing a sense of depression. A survey conducted by the People’s Bank of China (PBOC) revealed that optimism about personal income growth has dropped dramatically. As many as 15 percent of Chinese households have experienced a decrease in income, and a larger number expects the same fate. Job insecurity is also a concern, with 43 percent of respondents expressing uncertainty about their employment prospects. Pessimism regarding property values is prevalent, with only 15 percent of households expecting an increase in property values in the near future.
These factors have led to a significant shift in consumer behavior, with 60 percent of Chinese households prioritizing saving over consumption. This change in preference is evident in the rise in bank deposits, as more individuals choose to save their money rather than spend it. In fact, Chinese consumers paid down mortgages faster than they took them out, leading to a decline in outstanding mortgage values – a rare occurrence historically. Despite interest rate cuts by the PBOC, these measures have been insufficient to change consumer behavior, as deflation has outpaced rate cuts.
The property crisis is the main contributor to the negative sentiment among Chinese consumers. The collapse of major property developers has burdened financial markets with questionable debt and reduced the ability to support businesses and job expansions that drive consumer spending. With millions of families having pre-purchased apartments from now-defunct developers, many individuals have refrained from purchasing homes, resulting in a decline in construction activity and property values. Since a significant percentage of Chinese households own their homes, the drop in property values has had a severe impact on household net worth, further discouraging spending and encouraging saving.
Additionally, the zero-COVID measures implemented by Beijing during the pandemic have added to consumer wariness. The arbitrary closures, lockdowns, and quarantines have created income insecurities among middle- and low-income Chinese, leading to a decrease in spending. These effects are likely to persist for a considerable time. While income insecurities may subside, addressing the property crisis will require significant effort and time from authorities. The legacy of these events, coupled with the debt overhang they have created, will continue to impact consumer sentiment.
China faces a challenging road ahead, as the negative sentiment among Chinese consumers hinders efforts to drive economic growth. The shift towards consumer spending requires addressing the property crisis and rebuilding consumer confidence. It will take time, effort, and significant government intervention to overcome these obstacles and revive consumer sentiment in China.
Disclaimer: The views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
