Chinese Consumers Spending Reduces as this Spells Worrying Trend for the Economy
China’s ravenous consumer base could now begin to fill the effects of an economy that is currently under massive stress and strain.
While a majority of analysts have deduced that the country generally has a wealthier financial populous, a lot of people are cutting back on their spending because of being uncertain about how the future will play out for them financially.
A Fear of Crippled Investments
According to the chief economist at JD Digits, Jian Guang Shen, the reduction in consumer consumption is at its boiling point primarily because everyone is aware of the decline in investment that is taking place.
Moreover, a large number of individuals are aware of the current trade tensions taking place between the United States and China.
Additionally, Shen has commented that a large number of people have lost confidence in this year’s current predicament, which has led to a decline in consumption, which has been directly impacted.
That being said, he believes that consumption would return to normalcy after a couple of months.
Nevertheless, Shen notes that confidence in this year’s situation has declined massively, and hence, impacting overall consumption.
Indeed, retail sales have fallen by a whopping 8.6 percent October this year, in contrast to previous years which initially bagged a 10 percent growth or higher on a yearly basis.
Moreover, there has been a massive fall in the number of car sales in what is the largest car market, having dropped by 11.5 percent in only 2 months.
In fact, according to data released by Wide Info database, this was the first time in over six years that the country has recorded negative growth.
According to senior partner at McKinsey, Daniel Zipser, he acknowledges that there is plenty of anxiety in this economy and hence, it might not be doing so well.
Indeed, a person might still have the money to buy a new car, but they will want to wait due to the current economic situation.
There’s no denying it. China’s economy has declined rapidly this year, despite government intervention to minimize the reliance on debt-fueled growth.
In turn, this has made it more complex for business to get the necessary financing that they need.
Moreover, increased tension with the U.S., which is China’s biggest trading partner, has caused plenty of uncertainty. There is also the effect of slumping stocks and a weakening currency.
In fact, the Shenzhen and Shanghai composite is in the list of the world’s worst performing currencies this year. This hasn’t done much to boost consumer’s confidence.
That being said, quite a number of Chinese consumers have been affected by the peer-to-peer lending scams, whereby platforms purporting to have the ability to connect borrowers to investors end up disappearing with their hard-earned money.
Mortgage Debts Affecting Financial Power
Moreover, a large number of the Chinese populous now have the issue of mortgages that brings that dents their financial standings.
In fact, according to information released by McKinsey’s Zipser, the household debt stands to over 100 percent than the Chinese income on an annual basis. Which is much higher than that of the United States.
That being said, such pressures have not limited the Chinese from spending frivolously.
In fact, sales in the retail sector have grown by 8.6 percent, above the 4.6 percent that was recorded in the United States in October, the previous year.
Additionally, analysts have observed that the Chinese have been spending freely on other sectors such as dining out, travel, and healthcare.
Focusing on the Fintech Sector
Moreover, there have been massive sales tactics geared at focusing on facial recognition and augmented reality.
If that’s not enough, roughly 37 percent of new retail stores in Beijing have dabbled in the food and beverage industry. Additionally, the likes of home accessories and sportswear were also seeing an increase in the number of stores in their vicinity.
That being said, consumers are further taking advantage of the increasing developments being made in financial technology, otherwise known as fintech.
This has provided the spending populous an avenue to make purchases via installments or through credit.
Despite analysts saying that the overall amount is still low, individuals are still watching for subsequent risks down the road.
According to Shanghai-based analyst Felix Yang, the lending market has provided consumers with the ability to purchase expensive items in the technology department such as the iPhone X.
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