On Douban, a Chinese website that offers information on current events, music and more, young Chinese flock to groups offering money-saving tips. A group called Crazy Money Savers, which has over 600,000 subscribers, is encouraging its members to steer clear of takeout and bubble tea, and advising them to delete popular e-commerce apps like Alibaba and Pinduoduo.
In 2015, Chinese President Xi Jinping launched a new economic strategy that emphasized domestic consumption and production to take China’s economy to the next stage of development. But in recent years, many young Chinese — like those who have joined Douban’s Crazy Money Savers — have started saving, skimping and turning to social media influencers for advice on frugal living , a lifestyle that is in direct contradiction to the government’s ambitions.
The uncertainty caused by the COVID-19 pandemic has changed the consumption patterns of Chinese citizens. And Beijing’s relentless pursuit of “zero-COVID” at a time when China’s real estate sector is in a spiral and youth unemployment is skyrocketing has prolonged and exacerbated people’s economic anxiety.
Now Beijing’s economic planners, hoping to boost consumption to boost China’s economy, are trying to reverse the new frugal lifestyles of many young Chinese – a trend that threatens to upend the Chinese economy amid its worst downturn in decades.
In the 2010s, global companies touted the rise of Chinese buyers—particularly young buyers.
In 2017, Chinese millennials boosted the country’s luxury goods market by 20% to $22 billion in sales — the biggest jump in half a decade, consultancy Bain wrote in a 2018 report. During that time, China’s young shoppers were optimistic : Online shopping became easier and many of them were the only children in their families growing up in an era of uninterrupted economic growth and soaring real estate prices.
But because of the COVID outbreak, China’s retail sales — a measure of consumer demand — fell 21% year-on-year in February 2020, after rising 8.2% in the same month last year.
In 2020, a clear trend emerged on Chinese social media: the proliferation of so-called “low desire” and “low consumption” money-saving groups. Douban users created groups like Stingy Men’s Federation and Stingy Women’s Federation. COVID worries, coupled with disenchantment with soaring house prices and a cutthroat school system and jobs that offered fewer and fewer benefits, encouraged Chinese millennials and Gen Z to save more and buy less.
This year, the harsh and protracted COVID lockdowns imposed by Chinese authorities, along with a deepening housing crisis and high youth unemployment, have weighed on consumer sentiment. China’s annual retail sales growth surged to 34% in March 2021 as people believed the country was nearing the end of COVID. But a year later, in March 2022, that exuberance waned and China’s retail sales fell 3.5% and then 11.1% in April. The latest August numbers show a rise – up 5.4% – from a year earlier, although experts warn that many factors are still weighing on consumer demand.
“Chinese consumers have become more cautious, and we see no sign of this changing in the short term,” wrote Amy Huang, economist at nonprofit research firm The Conference Board, in an August note. Chinese consumers will “remain cautious about spending on non-essentials and increase their savings amid growing uncertainty about the economy,” she said.
Earlier this year, Shanghai experienced a severe lockdown that locked residents in their homes for eight weeks. Some residents were unable to get the food, medicine and health care they needed; others suffered psychological trauma. Vera, a 30-year-old financial professional who was born and raised in Shenzhen, visited Shanghai for a business trip in March. Their week-long visit turned into a five-week ordeal due to the lockdown: “I lost all sense of time and sense of self. I was stuck in the apartment alone every day…only connected to the outside world when I turned on VPN,” she said wealth on the condition that, like other young Chinese interviewed for this story, her last name will not be used due to fears of backlash from her boss or future employers. “I consider myself an emotionally tough person, but on day 12 I started to break down,” she said.
In the months that followed, a series of protests by Chinese homeowners who refused to pay their mortgages rocked China’s already embattled real estate sector. People’s confidence in the economy was further dampened as citizens became accustomed to real estate as a safe investment vehicle with inflated returns.
Recent events have shaken Vera’s faith in the authorities and prompted her to question China’s economic future for the first time. “I always thought I wanted to stay in China and buy a house. Now I’m really not sure,” she said.
Live your best (frugal) life
The events also prompted a change in consumption habits and a bleaker outlook for many young Chinese, such as 25-year-old Daphne from Shanghai, who works in marketing. The pandemic initially shifted Daphne’s spending to the internet. But the shock of lockdowns and mortgage protests in Shanghai “told me things were going wrong. The families of my family and friends have lost a chunk of money on their properties. You can’t bear to think about those losses now. Maybe now is the time to worry and start saving more… It’s better to be safe than sorry,” she said Wealth.
During and before the pandemic, Daphne felt able to spend a quarter of her income on shopping, dining, and other pursuits like karaoke and travel. Now “at least a handful” of closest friends can’t find jobs or have taken a pay cut, while their boss at work says “it’s not the time for a paycheck,” she said.
As a result, Daphne has started paying more attention to money-saving groups on social media. She has since traded the stew in restaurants for home-cooked food and sworn off designer bags for a while.
Daphne and her friends are not alone. China’s youth unemployment rate rose to nearly 20% in July. The country’s overall slowdown and the government’s crackdown on technology have led to wage cuts and mass layoffs.
Last year, as Chinese consumption recovered modestly, “affluent Gen Z was a key growth driver…and accounted for up to 80% of the luxury market’s growth,” Jacques Penhirin, partner at consultancy Oliver Wyman, said earlier this year. But “this time, affluent Gen Z might react differently, especially since a lack of job security might be something they’re dealing with for the first time,” Penhirin wrote.
As young Chinese look to save money, the government is urging them to spend more.
In Shenzhen — a southern China tech hub known as the country’s Silicon Valley — the city government rolled out a $15 million stimulus plan in May that offered subsidies to encourage spending on personal electronics, home appliances and electric vehicles. The month before, the city distributed about $70 million worth of consumption vouchers.
But these initiatives aren’t enough to stimulate the kind of spending Beijing needs, experts say.
Sluggish consumption remains a major problem for Beijing’s leaders. Chinese Premier Li Keqiang said in a speech Wednesday the government will “do everything we can to expand effective investment and encourage consumption” to cope with weak demand.
Beijing has been discussing boosting consumer spending for months while avoiding major changes like drastic easing of its zero-COVID measures or sending cash to struggling households, research firm Trivium China wrote in a recent note. But until Beijing decides so, consumer demand “will continue to falter,” the analysts said.