Chinese consumers, worried about a loss of income during Covid-19 lockdownsas well as their lingering fears about overall job security, are holding back China’s economic recovery.
Officials urging consumers to spend are concerned about people like Wu Lei, a soccer coach in Beijing who put off buying a new cellphone.
“I’ve lost the lion’s share of my income since Beijing halted after-school sports clubs in April,” said Wu, 37, a father of two daughters.
The five-week near-closure of the Chinese capital under VSChina’s strict Covid-19 measures were relaxed on Monday. “We don’t have spare money even in normal months, so now we feel really financially strained,” he said.
China to boost spending that has been depressed by Covid-19 curbs in some of its largest cities.
But piecemeal measures such as vouchers, subsidies for car buyers and digital yuan payments have been modest compared to other major global economies.
Policymakers have instead stuck to their preferred approach to stimulus, which focuses on businesses and infrastructure.
These measures, analysts say, will not be enough to bring about a recovery in consumer spending, which accounted for more than two-thirds of growth in China’s economy in the first quarter.
Beijing sees Chinese consumers as a driving force, as the economy is rebalanced away from a heavy reliance on exports and investment.
This, in turn, will hamper the strength of the recovery in the world’s second-largest economy, a key driver of global growth.
“Chinese consumers are shaken,” said Mark Tanner, managing director of the Shanghai-based research and marketing consultancy. skinny china.
“They lack the confidence they had before, partly because of the uncertainty surrounding the prolonged lockdown of the highly transmissible Omicron, but also because they don’t feel as good compared to other countries,” said he declared.
China’s retail sales fell 11.1% in April from a year earlier, the biggest drop since the peak of the first coronavirus outbreak two years ago that ravaged the city of Wuhan.
The subsequent rebound was then robust for high-end brands such as Louis Vuitton and Gucci, but broader consumption struggled. Retail sales for 2020 fell 3.9% from a year earlier, the first contraction since 1968.
But the overall economy grew 2.2% in 2020, following a record slump in the first quarter and making China the only major global economy to grow.
This time, analysts say, the picture is murkier. China’s once-high-flying property and tech sectors are faltering, and lingering labor tensions have undermined Chinese consumers and their “revenge consumption” that typically follows when lockdowns ease.
China’s urban unemployment rate rose to 6.1% in April, the highest since February 2020 and well above the government’s target ceiling of 5.5%.
Some economists expect employment to deteriorate before it improves, with graduates entering the job market in record numbers.
- Reuters, with additional editing by George Russell