Chinese cutting avocados, cocktails and kids
by Rachel Li on Oct 25, 2018
Sf Chronicle Business Report Sunday, August 26, 2018 Section D 1 – 5
Chen Siqi does not eat out so much anymore. Li Keli cut down on her travel and takes her son to a public playground instead. Wang Jiazhi stopped dating. Welcome to China’s “consumption, downgrade” culture, a potentially worrisome development for Beijing and the world. For years, the conversation in China was about “consumption upgrades.” As the economy took off, China’s middle class – now more than 40 million strong and still growing – decided to spend those bigger paychecks. It traded up from local brand to Nikes, from cheap phones to iPhone’s, from tea to $5 Starbuck lattes.
Today, China’s economy is slowing and shopping has slowed with it. The stock market is slumping. China’s currency has lost some of its value. The trade war with President Trump has left many Chinese feeling pessimistic. A Chinese consumption downgrade could be felt around the world. Chinese spenders have been a key driver of their country’s economic growth in recent years. China, in turn, has played a major role in global growth. Chinese consumers help global companies like Apple, General Motors, Volkswagen and many others. A consumption downgrade could also embolden Trump in his trade fight with China, as he gambles that Beijing cannot take much more economic damage.
This month JD.com, a Chinese e-commerce company, reported disappointing quarterly results. JD.com’s focus is providing China’s growing middle class with quality products. Alibaba Group, China’s biggest online retailer, reported mixed results on Thursday. Long term factors are driving down spending among young people in particular. The cost of education is going up. Housing in rich cities like Beijing has become unaffordable for many.
Many high earners feel anxious as well. Chen Ying, 33, an architect in Shanghai, said her consumption downgrade plan involved not shopping in department stores. Chen Ying said she did not expect her pay to rise too much in the future. Her younger colleagues do not make as much as when she first started four years ago, and her pay now is lower than that of older colleagues with similar experience four years ago. She used to get pay raise of 15 to 20 percent a year – rates that were not uncommon at fast growing industries in China in the past decade. Now she expects the raises to be 5 percent, if she gets them at all. She has started to think about retirement, but does not know where to begin. “In the past we had many inflated expectations,” she said. “Now we don’t expect so much.”