By Albee Zhang and Tony Munroe
BEIJING (Reuters) – Before the pandemic, Doris Fu imagined a different future for herself and her family: a new car, a bigger apartment, fine dining on weekends and vacations on tropical islands.
Instead, the 39-year-old marketing consultant from Shanghai is one of many Chinese in their 20s and 30s cutting spending and saving money where they can, rattled by the coronavirus lockdowns in China, high youth unemployment and a failing real estate market.
“I don’t have a manicure anymore, I don’t do my hair anymore. I went to China for all my cosmetics,” Fu told Reuters.
This newfound 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 mapping consumer behavior here for 16 years and in all that time it’s been the most concerning thing I’ve seen among young consumers,” said Benjamin Cavender, managing director 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 big tech companies has also had an outsized effect on the young workforce.
Unemployment among 16 to 24-year-olds stands at almost 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 the retail and e-commerce sectors, according to two sector surveys. The average salary in 38 major Chinese cities fell 1% in the first three months of this year, according to data compiled by online recruitment firm Zhilian Zhaopin.
As a result, some young people would rather save than splurge.
“I used to go see two movies a month, but I haven’t entered a cinema since the pandemic,” said Fu, a movie buff.
Retail sales in China rose only 2.7% year-on-year in July, recovering to 5.4% in August, but still well below levels of more than 7% in 2019, before the pandemic .
According to the latest quarterly survey from the People’s Bank of China (PBOC), China’s central bank, almost 60% of people are now inclined to save more rather than consume or invest more. This figure was 45% three years ago.
Overall, Chinese households added 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. last.
That’s a problem for China’s economic policymakers, who have long relied on increased consumption to support growth.
China is the only major economy to cut interest rates this year, in a bid to boost growth. China’s major state-owned banks cut retail deposit rates on Sept. 15, a move designed to discourage savings and boost consumption.
Addressing people’s increased propensity to save, a PBOC official said in July that when the pandemic subsides, the willingness to invest and consume will “stay off and increase.”
The PBOC did not respond to requests for comment from Reuters; neither does the Chinese Ministry of Commerce.
’10 YUANS DINNER’
After years of increasingly ardent consumption fueled by rising wages, easy credit and online shopping, a shift towards frugality brings young people in China closer to their more cautious parents, whose memories of the lean years before the economy took off made them more inclined to save.
“Amid a tough labor market and strong downward economic pressure, young people’s feelings of insecurity and uncertainty are something they have never experienced,” said Zhiwu Chen, Full Professor of Finance at Hong Kong University Business School.
Unlike their parents, some flaunt their sobriety online.
A woman in her 20s in the eastern city of Hangzhou, who uses the pseudonym Lajiang, has gained hundreds of thousands of followers by posting more than 100 videos of how to cook 10 yuan ($1.45) dinners on the Xiaohongshu lifestyle app and Bilibili streaming site.
In a one-minute video with nearly 400,000 views, she sautéed a dish consisting of 4 yuan basa fillet, 5 yuan frozen shrimp and 2 yuan vegetables, using a pink cutting board and a pink rice cooker.
Social media threads have sprung up to share money-saving tips, such as the “Living on 1,600 yuan a month” challenge in Shanghai, one of China’s most expensive cities.
Yang Jun, who said she was deeply in credit card debt before the pandemic, started a group called Low Consumption Research Institute on the Douban networking site in 2019. The group has attracted more than 150,000 members. Yang said she was cutting expenses and selling some of her goods on second-hand sites to raise cash.
“COVID-19 makes people pessimistic,” the 28-year-old said. “You can’t just be like before, spend all the money you make and start over next month.” She said she was out of debt.
Yang said she cut out her daily Starbucks coffee. Fu said she replaced her brand of makeup powder from Givenchy with a Chinese brand called Florasis, which is about 60% cheaper.
French luxury brand leader LVMH, owner of Givenchy, and coffee giant Starbucks Corp both said sales fell sharply in China in the past quarter.
China has given no signal on when or how it will exit its zero-COVID policy. And while policymakers have taken various measures in hopes of boosting consumption, from subsidies for car buyers to vouchers, far more money and attention has been devoted to infrastructure as a means of boosting consumption. economy.
Stability has been the key theme for Chinese policymakers this year, experts say, as President Xi Jinping prepares for a third term as head of the ruling Communist Party Congress next month.
“In the past, when you had an economic downturn, consumers were more likely to think that government policy is going to fix that very quickly,” CMR’s Cavender said. “I think right now the challenge is that when you ask young consumers, they really don’t know what the future holds.”
Fu, the marketing professional, said she has postponed plans to sell her two small apartments to buy a bigger one in a better school district for her son, and has given up on the bet for now. upgraded from his Volkswagen Golf.
“Why don’t I dare to upgrade my house and my car, even though I have the money?” she says. “Everything is unknown.”
(Reporting by Albee Zhang and Tony Munroe; Editing by Bill Rigby)