Under the influence of the COVID19 Epidemic, the three pillars of China’s economy – investment, exports and consumption – are growing weakly, especially in light of Beijing‘s strategy of internal economic circulation and the need for popular consumption to expand domestic demand.
As the Chinese New Year holiday comes to an end, people who have returned to their hometowns for the New Year are starting to return. On February 16, Alibaba Group released a report on consumption during the New Year period, showing that 100 million migrant workers “spent New Year’s Eve locally”.
The epidemic prevention and control has caused comprehensive damage to consumption, but there is also a regional differentiation of features, the first and second line and other labor inflow cities may benefit from consumption, the third and fourth line cities consumption hit the most; offline consumption such as restaurants, movies, tourism was severely impacted, online consumption is slightly hot.
According to Wang Han, chief economist at Industrial Securities, the “New Year in Place” has been widely promoted in all provinces, breaking the traditional Chinese New Year holiday feature of “high consumption + low production”.
According to Reuters, Zhu Jianfang, chief economist at CITIC Securities, is more cautious: “What needs to be made clear is that ‘local New Year’ is not the same as ‘no New Year’, let alone ‘no holiday’. The logic that industrial production is significantly stronger because the “New Year in Place” will extend the number of working days needs to be observed with caution.
The official and Caixin manufacturing purchasing managers’ indices (PMI) both fell to multi-month lows in January, highlighting the vulnerability of the economic rebound under the recurring epidemic and the high degree of uncertainty facing exports.
On February 17, Caijing magazine published an article analyzing China’s consumption situation, which is affected by the COVID19 epidemic and multiple complicating factors, the Chinese people’s income will increase by about 1.7 trillion yuan less in 2020. While income growth is seriously slowing down, the population’s propensity to consume is decreasing and propensity to save is increasing, with China’s household savings increasing by 1.6 trillion yuan more than in 2019 year-on-year. Under the double blow of a severe slowdown in income growth and a decline in consumption, final consumption for 2020 as a whole shows the first decline since 1978.
The most important factor determining consumption is the growth of disposable income, and people’s business income was most severely affected during the epidemic, with small and medium-sized business owners and self-employed entrepreneurs being the most affected. Among those whose wage income is affected, part-Time workers and urban migrants are the most directly affected groups.
According to a survey conducted by the Family Finance Survey Center of Southwest University of Finance and Economics, households with annual incomes of less than 30,000 yuan and 30,000-50,000 yuan are expected to see the greatest reduction in consumption, indicating that the low-income class has been hit harder than the middle and high-income classes in terms of income.
More importantly, the growth rate of Chinese people’s disposable income has actually been declining for years, from 10.6% in 2012 to 7.4% in 2015 and 5.8% in 2019.
The decline in disposable income growth and the downward trend in the population’s propensity to consume not only constitute a double blow to consumption, but are also two direct causes of China’s prolonged consumption slump.
A survey report released by the Chinese Academy of Social Sciences in December last year showed that both the income and consumption of the Chinese people are in a worrying situation.
The report, titled “Leisure Green Book: 2019~2020 China Leisure Development Report,” was jointly released by the Institute of Financial and Economic Strategies of the Chinese Academy of Social Sciences, the Tourism Research Center of the Chinese Academy of Social Sciences and the Social Science Literature Press.
The report shows that within the past year, the average annual leisure consumption of Chinese nationals was 5,647 yuan. Among them, 22.7% spent RMB 1001-3000, 10% spent RMB 3001-5000, and 11.1% spent RMB 5001-10000. 11.8% spent more than RMB 10000, but 44.4% spent only one-tenth of the annual leisure spending of high-income groups, i.e. The poll results show that the annual leisure spending of 11.8% of the population is over $10,000.
If we use the poll results as a sample and zoom in on China’s total population of 1.4 billion, this means that 620 million people (44.4% of the population) spend only $83 a month on leisure. Another 320 million people have less than 3,000 yuan per year, which is equivalent to about 250 yuan of leisure spending money per month.
In response to the report, Wu Ming-ze, an associate researcher at Taiwan‘s WI Harper Institute, told the Voice of America that the poll shows that most Chinese people still focus on basic living expenses and spend less on leisure and entertainment, and that the proportion of low-income people is still high.
Wu explained that the 333 principle is the basic assessment criterion for a well-off society, meaning that the average well-off household spends one-third of its income on basic living expenses, another one-third on savings, and the last one-third on enjoyment and recreation.
Wu emphasized that unless the majority of Chinese people only earn money and do not spend it, the poll shows that more than 60% of the Chinese population (about 940 million people) may spend less than RMB 3,000 on leisure each year, which means they are living a subsistence Life and can hardly be called an affluent well-off society.
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