Aug 21, 2023 - Economy

Economic woes pile up against Chinese consumers

Illustration of a hand holding a magnet attracting large amounts of Yuan.

Illustration: Aïda Amer/Axios

Chinese consumers haven't unleashed the kind of spending that many multinational companies had hoped for following the easing of COVID restrictions.

Why it matters: Economists have worried that "scarring effects" from lockdowns and job losses would take time to heal.

The latest: While the market is "really picking up," it's not been at the speed that "everybody had hoped for," L'Oréal CEO Nicolas Hieronimus told Reuters last month.

  • The company's competitor, Estée Lauder, noted a similar observation about pace last week when describing its China business.
  • Meanwhile, the country's biggest online platforms — Alibaba,, TikTok's China equivalent Douyin — have been focused on selling low-price goods this year as consumers are also belt tightening.

Flashback: That's a far cry from where hopes were at the end of last year — that as lockdowns ended, Chinese consumers would resume travel and spend feverishly and en masse in 2023.

  • Households had accumulated about $827 billion in excess savings since the pandemic began. And investors were eager to see where that cash would flow.

Reality check: But in the six months since Beijing loosened COVID restrictions, financial snapshots of hundreds of millions of families have become discordant.

Zoom in: Confidence levels among Chinese consumers have taken a hit as real estate sales have fallen about 50% below their peak levels three years ago, according to Bloomberg.

  • For context, China's real estate market accounts for as much as 70% of household wealth and 40% of collateral held by banks.
  • One of China's biggest property developers, Country Garden, is now also on the brink of default, and experts fear that its troubles could spread.
  • And China Evergrande Group's bankruptcy protection filing last week has only added to growing anxieties.

What they're saying: "The ongoing housing correction, high youth unemployment, and a price war over electric cars [are all fueling] poor consumer and business expectations," Erin Baggott Carter, a political science professor at the University of Southern California, tells Axios in an email.

  • "Higher domestic consumption is important for healthy, long-term economic growth, but encouraging it may require major — and therefore untenable — political changes."

What to watch: China is experiencing an "expectations recession," Bert Hofman, former China country director at the World Bank, told Bloomberg.

  • "Once everybody believes that growth will be slower going forward, this will be self-fulfilling."
  • Barclays, JPMorgan, Citi and Goldman Sachs are among investment firms that have cut their forecasts for China's economic growth, sometimes continually.

Go deeper: What China's slump means for the world

Go deeper