China's Consumption Recovery Limited Even After COVID-19 Crisis Ends

[Asia Economy Beijing=Special Correspondent Sunmi Park] It has been pointed out that even if China escapes the crisis situation of the COVID-19 pandemic, there are limits to expecting a consumption explosion.

On the 16th, Hong Kong's South China Morning Post (SCMP) reported that due to concerns such as economic growth slowdown, unstable employment market, and high debt levels, even if China gets out of the COVID-19 crisis, an explosive recovery in consumption may not appear.

For a rapid recovery of the Chinese economy, consumers need to unleash their suppressed consumption after the end of COVID-19. Last year, consumption accounted for about 60% of China's economic contribution. However, SCMP diagnoses that the environment is being created where it is not easy for about 400 million Chinese middle-class consumers, who are the main drivers of consumption, to realize a consumption explosion. SCMP stated, "COVID-19 has shaken the existing belief among the Chinese middle class that 'life always improves and income is sufficient to offset debt burdens.'"

For example, Jane Jung, a woman in her early 40s working as a fund manager belonging to the Chinese middle class, owns three apartments in Shenzhen, with a monthly mortgage principal and interest payment of 60,000 yuan. Previously, she had money left after paying off debts with her salary and real estate investment profits, but now, due to COVID-19, her previous income is not guaranteed, resulting in a monthly household deficit of 20,000 yuan.

She is trying to sell her existing apartments, but even lowering the price, no buyers have appeared. She said, "Unexpected scenarios have drained my cash," and added, "Even if the COVID-19 situation calms down, I am not thinking about increasing consumption. Many of my friends and relatives are facing similar problems."

According to a recent survey by Xinan University of Finance and Economics in China, 60.9% of the 3,143 households surveyed expected a decrease in household income in 2020. 25.9% anticipated a significant decrease in income, and 41.6% said they plan to reduce consumption expenditures this year because of it.

A similar survey conducted by global investment bank Morgan Stanley also shows the possibility that Chinese consumption expenditure will not explosively increase after COVID-19. In a survey of 2,000 urban consumers, only 25% said they planned additional spending such as travel. The report stated that while most Chinese people can increase spending on daily necessities like groceries and clothing, there is a tendency to reduce consumption on products that are not urgently needed now, such as luxury goods or electronics.

SCMP reported that although local governments in China are trying to boost the consumption market by issuing consumption coupons, the overall effect is small because it is implemented locally in some areas, and the benefiting sectors are limited. As a result, companies that have expected growth from Chinese consumption are still facing difficulties.

This content was produced with the assistance of AI translation services.