Frugal is the new style for young Chinese as economy falters By Reuters

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©Reuters. People rest on stone barricades on a street, following the outbreak of the coronavirus disease (COVID-19), in Shanghai, China September 9, 2022. REUTERS/Aly Song

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By Albee Zhang and Tony Munroe

BEIJING (Reuters) – Before the pandemic, Doris Fu envisioned a different future for herself and her family: a new car, a bigger apartment, fancy dinners on weekends and holidays on tropical islands.

Instead, the 39-year-old Shanghai marketing consultant is one of many Chinese in their 20s and 30s cutting costs and saving cash where they can, rattled by China’s coronavirus lockdowns, high youth unemployment and a faltering property market. .

“I don’t have manicures anymore, I don’t do my hair anymore. I’ve gone to China to buy all my cosmetics,” Fu told Reuters.

This new frugality, amplified by social media influencers touting low-cost lifestyles and sharing money-saving tips, is a threat to the world’s second-largest economy, which narrowly avoided contraction in the second quarter. Consumer spending accounts for more than half of China’s GDP.

“We’ve been mapping consumer behavior here for 16 years and in all that time this is the most concerned consumer I’ve ever seen,” said Benjamin Cavender, managing director of China Market Research Group (CMR).

China’s ‘COVID zero’ policy, which includes strict lockdowns, travel restrictions and mass testing, has taken a heavy toll on the country’s economy. The government crackdown on big tech companies has also had a huge effect on the young workforce.

Unemployment among 16-24-year-olds stands at almost 19%, after hitting a record 20% in July, according to government data. Some young people have been forced to take pay cuts, for example in the retail and e-commerce sectors, according to two industry surveys. The average salary in 38 major Chinese cities fell 1% in the first three months of this year, data compiled by online recruitment firm Zhilian Zhaopin shows.

As a result, some young people prefer to save than splurge.

“I used to go see two movies every month, but I haven’t set foot in a theater since the pandemic,” said Fu, an avid movie fan.

Retail sales in China increased by just 2.7% year-on-year in July, recovering to 5.4% in August, but still well below levels of mostly above 7% during 2019, before the pandemic.

Nearly 60% of people are now inclined to save more, rather than consume or invest more, according to the most recent quarterly survey by the People’s Bank of China (PBOC), China’s central bank. That figure was 45% three years ago.

Chinese households overall added 10.8 trillion yuan ($1.54 trillion) in new bank savings in the first eight months of the year, up from 6.4 trillion yuan in the same period last year.

That’s a problem for China’s economic policymakers, who have long relied on higher consumption to fuel growth.

China is the only leading economy to cut interest rates this year in an effort to stimulate growth. China’s big state-owned banks cut rates on personal deposits on September 15, a move designed to discourage saving and boost consumption.

Addressing people’s increased inclination to save, a PBOC official said in July that when the pandemic subsides, the willingness to invest and consume will “stabilize and increase.”

The PBOC did not respond to Reuters requests for comment; neither did the Chinese Ministry of Commerce.

’10 YUAN DINNER’

After years of increasingly fervent consumerism fueled by rising wages, easy credit and online shopping, a move toward frugality brings young people in China closer to their more cautious parents, whose memories of the difficult years before of economic takeoff have made them more inclined to save. .

“Amid the tough labor market and strong downward economic pressure, young people’s feelings of insecurity and uncertainty are something they never experienced,” said Zhiwu Chen, senior lecturer in finance at Hong Kong University Business School. Kong.

Unlike their parents, some flaunt their finances online.

A woman in her 20s in the eastern city of Hangzhou, who goes by the username Lajiang, gained hundreds of thousands of followers by posting more than 100 videos on how to prepare 10-yuan ($1.45) dinners on the lifestyle app. Xiaohongshu and the Bilibili streaming site (NASDAQ). :).

In a minute-long video with nearly 400,000 views, he sautés a dish made from a 4 yuan basa steak, 5 yuan frozen shrimp, and 2 yuan worth of vegetables, using a pink cutting board and a pink rice cooker.

Discussions have sprung up on social media to share money-saving tips, such as the “Live on 1,600 yuan a month” challenge in Shanghai, one of China’s most expensive cities.

Yang Jun, who said she was heavily in credit card debt before the pandemic, started a group called the Low Consumption Research Institute on the Douban networking site in 2019. The group has attracted more than 150,000 members. Yang said she is cutting corners and selling some of her belongings on second-hand sites to raise money.

“COVID-19 makes people pessimistic,” the 28-year-old said. “You can’t be like before, spend all the money you make and do it again next month.” She said that she is now debt free.

Yang said he has eliminated his daily coffee from Starbucks. Fu said she switched her powder makeup brand from Givenchy to a Chinese brand called Florasis, which is about 60% cheaper.

French luxury brand leader LVMH, owner of Givenchy, and coffee giant starbucks corporation (NASDAQ:) both said sales fell sharply in China in the latest quarter.

China has given no indication of when or how it will exit its zero COVID policy. And while lawmakers have taken various measures in hopes of boosting consumption, from subsidies for car buyers to shopping vouchers, much more money and attention has been directed toward infrastructure as a way to stimulate the economy.

Stability has been the key issue for China’s policymakers this year, experts say, as President Xi Jinping prepares for a third leadership term at next month’s ruling Communist Party congress.

“In the past, when there was an economic downturn, consumers were more likely to feel that government policy would fix this problem very quickly,” said CMR’s Cavender. “I think the challenge right now is when you interview younger consumers, they really don’t know what the future holds.”

Fu, the marketing professional, said she has put off plans to sell her two small apartments to buy a larger one in a better school district for her son, and for now has given up on upgrading her Volkswagen (ETR:) Golf.

“Why don’t I dare to improve my house and my car, even if I have the money?” she said. “Everything is unknown.”

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