Frugal is the new cool for Chinese youth as the economy falters

BEIJING, Sep 19 (Reuters) -Before the pandemic, Doris Fu envisioned a different future for herself and her family: new car, bigger apartment, fine dining on weekends and holidays on tropical islands.

Instead, the 39-year-old marketing consultant from Shanghai is one of many Chinese in their 20s to 30s who cut spending and save money where they can, rocked by China’s coronavirus blockade, high youth unemployment and a faltering housing market.

“I no longer have a manicure, I no longer wash my hair. I went to China for all my cosmetics,” Fu told Reuters.

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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 have been mapping consumer behavior here for 16 years and in all that time this is the most concerned I have seen young consumers,” said Benjamin Cavender, chief executive officer of the China Market Research Group (CMR).

China’s “zero-COVID” policy – including severe lockdowns, travel restrictions and mass testing – has put a strain on the country’s economy. The government crackdown on big tech companies has also had a huge effect on the young workforce.

Unemployment among people aged 16 to 24 is nearly 19%, having hit a record high of 20% in July, according to government data. According to two industry surveys, some young people have been forced to cut wages, for example in the retail and e-commerce sectors. The average salary in 38 major Chinese cities fell by 1% in the first three months of this year, according to data collected by online recruiting firm Zhilian Zhaopin.

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

“I used to go to two movies a month, but I haven’t entered a cinema since the pandemic,” said Fu, a film buff.

Retail sales in China rose just 2.7% yoy in July, recovering to 5.4% in August, but still well below mostly above 7% levels in 2019, before the pandemic. .

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

Chinese households as a whole 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.

This is a problem for Chinese policymakers, who have long relied on increased consumption to support growth.

China is the only leading economy that has cut interest rates this year in an effort to stimulate growth. China’s large state-owned banks cut rates on personal deposits on September 15, a move designed to discourage savings and increase consumption. Read more

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

The PBOC did not respond to Reuters requests for comment; not even the Chinese Ministry of Commerce.

‘DINNER 10 YUAN’

After years of increasingly ardent consumerism fueled by rising wages, easy credit and online shopping, a movement towards frugality brings young people in China closer to their more cautious parents, whose memories of lean years before the economy took off. they made them more inclined to save.

“Amidst the difficult job market and strong downward economic pressure, young people’s feelings of insecurity and uncertainty are something they have never experienced,” said Zhiwu Chen, a professor of finance at Hong Kong University Business School.

Unlike their parents, some are showing off their thrift online.

A woman in her 20s in the eastern city of Hangzhou, who uses the Lajiang doorknob, has gained hundreds of thousands of followers by posting more than 100 videos on how to make 10 yuan ($ 1.45) dinners on the Xiaohongshu lifestyle app and website. streaming Bilibili.

In a one-minute video with nearly 400,000 views, he stir-fry a dish of 4 yuan staple fillet, 5 yuan of frozen shrimp and 2 yuan of vegetables, using a pink cutting board and a pink rice cooker.

Social media discussions arose to share tips for saving money, such as the “Live 1,600 yuan a month” challenge in Shanghai, one of the most expensive cities in China.

Yang Jun, who said she was deeply 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 attracted more than 150,000 members. Yang said she is cutting expenses 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 just be like before, spend all the money you make and come back next month.” He said he has no debt now.

Yang said he cut his daily Starbucks coffee. Lei fu said she switched her makeup powder brand from Givenchy to a Chinese brand called Florasis, which costs around 60% less.

French luxury brand leader LVMH (LVMH.PA), which owns Givenchy, and coffee giant Starbucks Corp (SBUX.O), both said sales in China dropped dramatically in the last quarter. Read more

China has not given any signals on when or how it will exit its zero-COVID policy. And while policy makers have taken various measures in hopes of increasing consumption, from subsidies for car buyers to shopping vouchers, far more money and attention has been directed to infrastructure as a way to stimulate the economy.

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

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

Fu, the marketing professional, said she postponed plans to sell her two small apartments to buy a bigger one in a better school district for her son, and for now she has given up on upgrading her Volkswagen Golf.

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

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Reporting by Albee Zhang and Tony Munroe Editing by Bill Rigby

Our Standards: Thomson Reuters Trust Principles.

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