Chinese consumer spending has failed to respond to government measures despite slowing household deposits and slashed interest rates by banks. According to data from the People’s Bank of China, Chinese households added 9.27 trillion yuan ($1.3 trillion) in new deposits in the first half of the year, with a significant decrease of 22% in June compared to the previous year. While outstanding household yuan deposits rose by 10.6% year-on-year in June, it remained near the lowest in at least three years. This reluctance to spend indicates that risk-averse residents prefer to repay debt and invest in wealth management products.
Recent data showed that Chinese retail sales only rose by 2% in June compared to the previous year, marking the weakest growth in 18 months. Businesses were forced to slash prices due to deflationary pressures, affecting various sectors including cars and clothing. Despite Beijing’s efforts to stimulate consumption through initiatives like trade-ins of consumer goods, it seems that Chinese savers are still hesitant to spend their money on retail purchases.
Analysts have pointed out that Chinese consumer spending is faltering due to households becoming more cautious amidst falling property prices, job insecurity, and high debt levels. This caution has contributed to a slower economic growth rate of 4.7% in the second quarter, below expectations. While the Chinese deposit growth aligns with bank lending trends, the overall demand seems to be faltering, with key indicators hitting record lows.
Despite the potential for China’s deposit pile to be a long-term growth driver, analysts suggest that Beijing should provide more support to consumers, especially given the risks of excess capacity amid trade restrictions. The government has focused on bolstering manufacturing prowess but needs to shift its attention towards encouraging consumer spending. With household yuan deposits reaching record highs, there is an opportunity for policymakers to address the root causes of consumers’ risk-averse behavior and promote a more sustainable spending trend.
Overall, the slow growth of Chinese consumer spending indicates a broader trend of economic aversion and cautious consumer behavior. While government measures have aimed to boost consumption, the reluctance of Chinese savers to spend their money on retail purchases continues to be a challenge. As Beijing navigates these economic challenges, there is a need for more targeted policies that address the underlying issues affecting consumer spending patterns.