Across The Border | What’s holding back China’s consumption growth?

As China’s economy slows, pressures are building up on employment and income growth, dragging down retail sales and threatening the outlook for consumption growth.

Wage and household income growth has weakened in China, while jobs also declined in state-owned firms and private companies, posing risks to a revival of domestic demand and an upturn in private consumption, say analysts.

China’s personal disposable income grew at a slower pace of 6.5 per cent in the first quarter, compared with 7.4 per cent in 2015, the National Bureau of Statistics reported recently. The percentage fall in income growth was much bigger than the percentage decrease in GDP during the same time period, as China’s GDP growth slowed to 6.7 per cent in the first quarter from 6.9 per cent in 2015.

“Household income growth has weakened significantly, posing a threat to the prospect for consumption,” said Gao Yuwei, a researcher at International Finance Institute for Bank of China.

Consumer sentiment has plunged in recent months, as the consumer sentiment index hit a 28-month low of 100 in March, versus 104.4 in February. Retail sales also increased more slowly than expected in April at 10.1 per cent, versus 10.5 per cent in March.