By Alby Chang and Tony Munro
BEIJING (Reuters) – Before the epidemic, Doris Fu imagined a different future for herself and her family: a new car, a bigger apartment, and fine dining on weekends and vacations on tropical islands.
Instead, the 39-year-old Shanghai marketing consultant is one of many Chinese in their 20s and 30s who are cutting spending and providing cash where they can, due to China’s coronavirus lockdown, high youth unemployment and a faltering property market.
“I no longer have a manicure, I no longer do my hair. I went to Made in China for all my cosmetics,” Fu told Reuters.
This new austerity, amplified by social media influencers promoting low-cost lifestyles and sharing money-saving tips, is a threat to the world’s second-largest economy, which narrowly escaped a downturn 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 this has been the most worrying young consumer to me,” said Benjamin Cavender, managing director of the China Market Research (CMR) group.
China’s ‘COVID-free’ 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 had a huge impact on the young workforce.
Unemployment among 16- to 24-year-olds is roughly 19%, after hitting a record 20% in July, according to government data. Some young people have been forced to cut wages, for example in the retail and e-commerce sectors, according to two industry surveys. Data collected by online recruitment firm Zhilian Zhaopin showed that the average salary in 38 major Chinese cities fell 1% in the first three months of this year.
As a result, some young people prefer saving over extravagance.
“I’ve been going to see two movies a month, but I haven’t been to the cinema since the pandemic,” said Fu, a passionate movie fan.
China’s retail sales rose only 2.7% year-on-year in July, rebounding to 5.4% in August, but still well below the 7% surplus levels during 2019, before the epidemic.
Nearly 60% of people now tend 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 number was 45% three years ago.
Chinese households overall 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.
This is a problem for China’s economic policymakers, who have long relied on increased consumption to boost growth.
China is the only leading economy that cut interest rates this year, in an effort to stimulate growth. China’s state-owned banks cut interest rates on personal deposits on September 15, a move aimed at discouraging saving and increasing consumption.
Speaking of people’s rising propensity to save, an official with the People’s Bank of China (PBOC) said in July that when the epidemic subsides, the desire to invest and consume will “stabilize and rise.”
The People’s Bank of China did not respond to Reuters requests for comment. As well as the Chinese Ministry of Commerce.
“10 yuan dinner”
After years of fervent consumerism fueled by rising wages, easier credit and online shopping, the move toward the economy is bringing China’s young people closer to their more cautious parents, whose memories of the lean years before the economy took off made them more inclined to save. .
“Amidst a challenging job market and strong downward economic pressure, young people’s sense of insecurity and uncertainty is something they have never experienced before,” said Qiu Chen, professor of finance at the University of Hong Kong School of Business.
Unlike their parents, some show off their savings online.
A woman in her twenties in the eastern city of Hangzhou, who uses the handle Lajiang, has gained hundreds of thousands of followers who have posted more than 100 videos of how to make 10 yuan ($1.45) dinner on the Xiaohongshu lifestyle app and streaming website Bilibili.
In a one-minute video that has garnered nearly 400,000 views, she flips a plate made of 4 yuan basa slices, 5 yuan frozen shrimp, and 2 yuan vegetables, using a pink cutting board and pink rice cooker.
Social media discussions have spread to sharing money-saving tips, such as the “Live off 1,600 yuan per month challenge” in Shanghai, one of China’s most expensive cities.
Yang Jun, who said she was mired in credit card debt before the pandemic, started a group called the Low Consumption Research Institute on the communication site Douban in 2019. The group has attracted more than 150,000 members. Yang said she is cutting spending and selling some of her holdings at second-hand sites to raise money.
“Covid-19 is making people pessimistic,” the 28-year-old said. “You can’t be like before, spend all the money you make, and get it back next month.” She is now out of debt.
Yang said she cut out her daily Starbucks coffee. Fu said she changed her makeup powder brand from Givenchy to a Chinese brand called Floraces, which is about 60% cheaper.
French luxury brand leader LVMH, which owns Givenchy, and coffee giant Starbucks Corp. said sales fell sharply in China in the last quarter.
China has not given any indication as to when or how it will exit the non-proliferation policy. And while policymakers have taken various measures in hopes of boosting consumption, from car-buyer subsidies to shopping vouchers, more money and attention has been directed toward infrastructure as a way to stimulate the economy.
Experts say stability has been the main topic for China’s policymakers this year, as President Xi Jinping prepares for a third term at the congress next month for the ruling Communist Party.
“In the past, when you had an economic slowdown, consumers were more likely to feel that government policy would fix that problem very quickly,” CMR’s Cavender said. “I think the challenge 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 for now she has given up the upgrade from a Volkswagen Golf.
“Why wouldn’t I dare upgrade my house and car, even if I had the money?” She said. “Everything is unknown.”
(Reporting by Alby Zhang and Tony Munro; Editing by Bill Rigby)