BEIJING, Sept 19 (Reuters) – Before the pandemic, Doris Fu envisioned a different future for herself and her family: a new car, a bigger apartment, good food on weekends and vacations on tropical islands.
Instead, the 39-year-old market consultant in Shanghai is one of many Chinese in their 20s and 30s who are cutting expenses and saving money where they can, rattled by China’s coronavirus shutdowns, high youth unemployment and a faltering property market.
“I no longer have manicures, I don’t get to do my hair anymore. I’ve gone to the China team for all my cosmetics,” Fu told Reuters.
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This new frugality, amplified by social media influencers touting low-cost lifestyles and sharing money-saving tips, is a threat to the world’s second-largest economy, which narrowly avoided contraction in the second quarter. Consumer spending accounts for more than half of China’s GDP.
“We’ve been surveying consumer behavior here for 16 years, and in all that time, this is the most worried I’ve seen young consumers,” said Benjamin Cavender, CEO of China Market Research Group (CMR).
China’s “zero COVID” policy – including strict lockdowns, travel restrictions and mass testing – has taken a heavy toll on the country’s economy. The government’s crackdown on large technology companies has also had an outsized effect on the young workforce.
Unemployment among people aged 16 to 24 is nearly 19%, after hitting a record high of 20% in July, according to government data. Some young people have been forced to take pay cuts, for example in retail and e-commerce, according to two industry surveys. Average wages in 38 major Chinese cities fell 1% in the first three months of this year, data compiled by online recruitment firm Zhilian Zhaopin shows.
As a result, some young people prefer to save rather than spend.
“I used to watch two movies every month, but I haven’t entered a movie theater since the pandemic,” said Fu, an avid movie fan.
Retail sales in China rose just 2.7% year-on-year in July, recovering to 5.4% in August, but still well below the largely 7%-plus levels of 2019, before the pandemic.
Nearly 60% of people are now inclined to save more, rather than consume or invest more, according to the latest quarterly survey by the People’s Bank of China (PBOC), China’s central bank. That figure was 45% three years ago.
Chinese households added a total of 10.8 trillion yuan ($1.54 trillion) in new bank savings in the first eight months of the year, up from 6.4 trillion yuan in the same period last year.
That’s a problem for China’s economic policymakers, who have long relied on increased consumption to bolster growth.
China is the only leading economy to cut interest rates this year, in an effort to stimulate growth. China’s major state-owned banks cut personal deposit rates on September 15, a move designed to discourage savings and boost consumption. read more
Addressing the increase in people’s propensity to save, a PBOC official said in July that as the pandemic subsides, the willingness to invest and consume will “stabilize and rise.”
The PBOC did not respond to Reuters requests for comment; nor did China’s Ministry of Commerce.
’10 YUAN DINNER’
After years of increasingly eager consumerism fueled by rising wages, easy credit shopping and online shopping, a move toward frugality is bringing young people in China closer to their more cautious parents, whose memories of lean years before the economy took off have made them more inclined to save.
“Amid the tough labor market and severe downward economic pressure, young people’s feelings of uncertainty and insecurity are unprecedented,” said Zhiwu Chen, professor of finance at Hong Kong University Business School.
Unlike their parents, some are showing off their frugality online.
A woman in her 20s in the eastern city of Hangzhou, who goes by the handle Lajiang, has amassed hundreds of thousands of followers posting more than 100 videos on how to make 10 yuan ($1.45) dinners on lifestyle app Xiaohongshu and streaming site Bilibili.
In a one-minute video with nearly 400,000 views, she cooks a dish made of a 4-yuan basa fillet, 5 yuan frozen shrimp and 2 yuan vegetables, using a pink cutting board and a pink rice cooker.
Discussions on social media have sprung up to share savings tips, such as the “Live on 1,600 Yuan a Month Challenge” in Shanghai, one of China’s most expensive cities.
Yang Jun, who said she was deep in credit card debt before the pandemic, started a group called the Low Consumption Research Institute on the networking site Douban in 2019. The group has attracted more than 150,000 members. Yang said she is cutting expenses and selling some of her possessions on used websites to raise money.
“Covid-19 makes people pessimistic,” the 28-year-old said. “You can’t just be like before, spend all the money you make, and make it back again next month.” She said she is now out of debt.
Yang said she has cut out her daily Starbucks coffee. Fu said she switched from Givenchy’s make-up powder brand to a Chinese brand called Florasis, which is about 60% cheaper.
French luxury brands leader LVMH ( LVMH.PA ), which owns Givenchy, and coffee giant Starbucks Corp ( SBUX.O ) both said sales in China fell sharply in the latest quarter. read more
China has given no signal as to when or how it will exit its zero-COVID policy. And while politicians have taken various measures in hopes of boosting consumption, from subsidies for car buyers to vouchers, far more money and attention has been directed at infrastructure as a way to stimulate the economy.
Stability has been the main theme for China’s policymakers this year, experts say, as President Xi Jinping prepares for a third term at next month’s congress of the ruling Communist Party.
“In the past, when you had economic downturns, consumers were more likely to feel that government policy is going to solve this problem very quickly,” said Cavender at CMR. “I think the challenge right now is when you interview younger consumers, they don’t really know what the future holds.”
Fu, the marketing expert, said she has postponed plans to sell her two small apartments to buy a larger one in a better school district for her son, and has given up for now on upgrading from the Volkswagen Golf.
“Why can’t I upgrade my house and car even though I have the money?” she said. – Everything is unknown.
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Reporting by Albee Zhang and Tony Munroe Editing by Bill Rigby
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