China’s middle class does not ‘dare to spend’ until post-Covid economy shows clear signs of recovery

Easing unemployment pressures and lifting public wealth growth prospects have been earmarked as key tasks for a sustained post-Covid recovery in China

But boosting consumer sentiment would require the creation of a ‘positive cycle’ in the economy as a whole, analysts and experts point out

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Even relatively affluent Chinese are not keen to invest or spend like before as the economy battles persistent deflation risks amid a property market slump and bleak business sentiment. Photo: AP

Published: 10:00am, 26 Dec 2023Updated: 10:44am, 27 Dec 2023

Millions of middle-class Chinese are tightening their belts, not “daring to spend” until a solid economic recovery is in sight.

Easing unemployment pressures and lifting prospects for public wealth growth are among key tasks mapped out by top Chinese leaders for the new year, as the post-Covid economy struggles against persistent deflation risks amid a property market slump and bleak business sentiment.

But despite robust savings and the lure of VIP services from wealth managers at the banks, even relatively affluent Chinese are not keen to invest or spend like before.

The economy is not doing well so everyone is worried about the future, so why should I spend money?

Small-business owner named Huo

“The stock market and real estate are in a slump and almost all kinds of investments are shrinking, no one dares to spend,” a small-business owner named Huo from China’s southern tech hub of Shenzhen said.

“The economy is not doing well so everyone is worried about the future, so why should I spend money? Consumption can’t be boosted by a few more purchases of clothes or jewellery.”

Official data bears out Huo’s pessimism. Property sales by floor area in the first 11 months of 2023 fell by 8 per cent year on year, according to the National Bureau of Statistics. Compared to 2019, the slide was more than 32 per cent.

Retail sales rose by 10.1 per cent in November amid a continued rebound following a dismal second quarter, though this was mainly thanks to low base of comparison last year due to massive lockdowns in many cities under China’s strict zero-Covid restrictions.