China’s rising instant noodle sales revive debate over if Chinese consumers are spending less
- Sharp recovery in sales renews talk of whether people are tightening their belts because of economic worries
- Instant noodle sales slipped to 38.5 billion in 2016, but rose back to more than 40 billion servings last year – or more than 38.8 per cent of total global sales
The sharp recovery of instant noodle sales in China has reinforced debate over a controversial economic topic: are consumers downgrading their consumption due to fears about the outlook?
The debate is important because the Chinese government is counting on consumer spending to help support the economy amid the trade war with the United States. If consumers hold back on their spending, it could mean growth may slow faster than expected.
Consumption of instant noodles in mainland China and Hong Kong started falling after 2014, partly because cheap takeaway meals were being heavily subsidised by food delivery start-ups. Instant noodle sales slipped to 38.5 billion servings in 2016, but rose back to more than 40 billion servings last year – or more than 38.8 per cent of total global sales, according to the World Instant Noodles Association. Analysts expect sales to rise further this year.
Instant noodles are an iconic consumer product associated with China’s rapid industrialisation over the last 40 years. Sales rose sharply in tandem with the rise in industrial workers and declined with the rise of the Chinese middle class, who used their bigger incomes to buy higher-end food products.
Because of their popularity and importance, instant noodle and car sales are often compared to gauge whether Chinese consumers are upgrading their spending – buying more expensive items – or downgrading their consumption by buying cheaper alternatives and saving more.
Chinese passenger car sales declined for 14 of the 15 months to August, according to the China Association of Automobile Manufacturers, citing data from the passenger car association. Analysts see this as an indication that the combination of the slowdown in income growth, higher debt levels and worries about the outlook for their jobs is causing consumers to be more frugal in their spending.
The debate comes as retail sales growth continued to slow down in recent months, with weakening car sales being the biggest drag, according to the National Bureau of Statistics. However, retail sales of food grew 10.6 per cent from January to August, which was higher than the overall growth rate of 7.5 per cent.