Coronavirus: Chinese consumers less willing to splurge, casting shadow over second quarter rebound

Chinese consumers were less willing to spend money in May than March, when large parts of the country were still under coronavirus lockdown, a new survey shows

The weak consumer sentiment has cast doubt over second quarter growth, which some economists expect to turn positive

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New surveys showing weak consumer sentiment has cast doubt over a second quarter economic rebound in China. Photo: EPA-EFE

Published: 6:01pm, 7 Jul 2020Updated: 11:04am, 8 Jul 2020

Alex Shi had been eyeing a 400 yuan (US$57) rice cooker online for weeks, but she eventually abandoned the purchase after considering her cash balance for the rest of the year.

Shi, who takes freelance jobs in media and communication in Beijing, has felt increasing pressure on her income during the pandemic after some firms slashed their freelance budgets. With many of her projects having uncertain payment dates, she stopped buying big-ticket items, including cellphones and household appliances, as well as pricey imported snacks, and ate two meals at home every day.

“My next gig is probably this Chinese reality TV show at the end of July. I will be an executive producer. Just for a few days. I can get paid quickly,” Shi said.

Apart from government investment in infrastructure, much of the world’s second-largest economy is betting on the spending power of about 1.4 billion people to boost the economy. But some preliminary survey data showed that consumers were less willing to spend than earlier this year, when the outbreak was at its peak in China.

I don’t think a rebound in consumption will happen in the near future. The key reason is expectations of lower income.

Gan Li

According to a roughly quarterly survey of 5,000 random Chinese households conducted by the Southwestern University of Finance and Economics, the proportion of people who expected to spend less on consumption increased from 40.2 per cent in March to 52.3 per cent in May.

The declining willingness to spend applied to all income groups. Compared with 39.6 per cent in March, 55.9 per cent of people with an annual income below 30,000 yuan said they would spend less in May, while the proportion increased by 8 percentage points among people with an income greater than 200,000 yuan, according to the survey.

“I don’t think a rebound in consumption will happen in the near future. The key reason is expectations of lower income. There is less money for the poor. For the rich, ‘precautionary’ saving motives contribute to less consumption,” said Gan Li, a professor from Texas A&M University who led the survey.

The survey also said that the proportion of respondents’ employers laying off people or lowering wages almost doubled in May compared with March. In particular, 20 per cent fewer rural residents were employed in May as opposed to a year earlier, compared with a decline of 10 per cent for those living in urban areas.