Chinese consumers are reportedly choosing to pay down debt and buy wealth management products, despite government attempts to encourage spending.
According to Reuters, consumers in the country put less money into their bank accounts in June, but they didn’t spend it. report Friday (July 19th).
“The year-on-year decline in excess savings has not yet translated into increased consumption.” Tommy SheHead of Greater China Research OCBC Bank“This may be related to households reducing their debt by paying off loans early and shifting their savings into wealth management products,” the bank said in a note, according to the report.
According to the report, the Chinese government is lowering deposit rates in an attempt to encourage consumers to spend rather than save.
However, risk-averse consumers are shifting their money from bank deposits to wealth management products, the report noted.
China is seeing falling property prices, a shaky job market, a fragile social security net and rising household debt, making consumers cautious, according to the report.
Bloomberg reported in December that a survey of 20 middle- to upper-class Chinese consumers found they were focused on saving more for the future, cutting back on unnecessary spending, and putting off big purchases like homes and cars.
The report said that as China faces an economic downturn with falling exports, a manufacturing slowdown and a slump in real estate, even the country’s top earners are worried about future job prospects.
The country’s economic growth fell to its lowest level in five quarters in the second quarter.
China’s gross domestic product (GDP) grew 4.7% in the fourth quarter, below all but one of 28 forecasts in a survey of economists, Bloomberg reported on Monday (July 15).
Moreover, retail sales growth posted its slowest monthly growth in nearly two years, suggesting that government confidence-boosting measures are not having much of an impact on consumers.
A Reuters report on Friday cited an analyst note. Maybank But to get Chinese consumers to spend more, he said “structural solutions” were needed to the problems they face.
“Instead of one-off stimulus packages, policymakers need to address the root causes of consumers’ risk aversion and encourage them to spend their income,” the analysts wrote.
