Finance & Economics

China’s Middle Class Concerns About Spending

According to the results of a study conducted by employees of the Southwestern University of Finance and Economics in Chengdu, Sichuan Province, Chinese families who belong to the middle-class category continue to take a cautious approach in the context of their spending issues.

China’s Middle Class Concerns About Spending

The mentioned tendency is most noticeably manifested in the attitude towards making purchases in the real estate sector. It is worth noting that the mood of the inhabitants of the Asian country, which is not optimistic, is observed against the background of attempts by the Chinese authorities to ease the purse strings of families.

The quarterly wealth and income survey of Southwestern University, released last week, notes that the index of family expectations for future spending is currently lower even compared to similar indicators recorded in the early days of the coronavirus pandemic.

The study of the Household Wealth Index of China, conducted by the Survey and Research Centre for China Household Finance of the Asian country, contains information that the corresponding figure was fixed at 101.9 in the first quarter of 2024. In the fourth quarter of last year, this indicator was 103.0. It is worth noting that the 100-point figure is a kind of dividing line between expanding spending plans and contracting them. In the second quarter of 2020, when the coronavirus pandemic became a factor affecting the state of affairs in the economy, the mentioned index was 102.6.

During the study, households’ spending plans were analyzed, with an average assets of 1.5 million yuan ($207,000). Also, in this case, the intentions of families whose average income is around 170,000 yuan were taken into account.

It is worth noting that at present, the factor of domestic consumption is of particular importance for Beijing in the context of economic development prospects. The leadership of the Asian country has high hopes for the financial activity of citizens aimed at making purchases in the sectors of goods and services, as export activity increasingly faces external obstacles. Debts are also growing in China, including those related to municipal authorities, which formed an unfavorable investment environment and worsened the prospects for raising finances. Under the conditions of the specified circumstances, it is domestic consumption that can become a source of stimulation of the positive economic dynamic. At the same time, the present consumer sentiment indicates that this factor is unlikely to be fully realized in the context of the impact on the mentioned dynamic.

At the same time, statistics show that domestic consumption is nevertheless a positive driving force for China’s economic system. According to information published by the National Bureau of Statistics, the gross domestic product (GDP) of the Asian country for the first quarter of the current year showed an increase of 5.3% compared to the result for the same period of 2023. These data also indicate that domestic consumption contributed to economic growth by 73.7%.

Moreover, in the first quarter of 2024, retail sales of consumer goods increased by 4.7% compared to the result for the same period in 2023. It is worth noting that this indicator reflects the level of consumption in the country.

At the same time, outlays in discretionary areas such as travel and entertainment mostly remained at the pandemic level, although it rose to 99.6 in the first quarter compared with 97.5 three months earlier.

Also, in January-March 2024, the share of households buying new homes in China was 6.4%. At the same time, this indicator was fixed at 7.5% in the last three months of 2023. Also, according to the results of the survey, it was found that in the second quarter of 2024, only 6.8% of households intend to buy property. At the same time, 20.2% of households announced plans to adhere to a wait-and-see attitude.

The mentioned consumer sentiment is largely consistent with the tendency of declining investment in China’s real estate sector. Data from the National Bureau of Statistics show that in the first four months of 2024, the corresponding indicator fell by 9.8% year-on-year. Also, during this period, the volume of floor space sold decreased by 20.2%.

At the same time, citizens’ expectations regarding the economic prospects have improved slightly in China. The study found that 62.3% of respondents do not see signs of optimism in the context of assessing the most likely economic dynamic over the next 12 months. It is worth noting that three months earlier, 66.4% of respondents held the corresponding point of view.

As we have reported earlier, China’s Capital Outflow Demonstrates Growth.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.