The economic slowdown in China is affecting the middle class, the largest in the world. The Chinese economy is still growing, but at a slower rate than in previous decades, causing uncertainty among the 700 million people in the middle class. President Xi Jinping is working to improve international relations while prioritizing national security over the economy, which has led to some concerns among foreign companies. Although China’s economic numbers are improving, there is still a sense of anxiety among the public, evident in the high savings rate and low consumer confidence.
Young professionals in China are feeling the effects of the economic downturn, with higher levels of unemployment and job insecurity. Midcareer professionals, like Li Junwei, are facing layoffs and the challenge of finding new job opportunities. Many are considering returning to their hometowns for financial reasons, leaving behind the opportunities available in major cities. The concept of “reverse consumption” is becoming more prevalent, as consumers prioritize value for money over brand names, impacting foreign luxury brands like Gucci.
The economic anxiety is palpable in China, with social media filled with money-saving tips and public libraries seeing an influx of job seekers. Sales of lottery tickets have surged, particularly among young people, as they grapple with higher unemployment rates compared to the U.S. Professionals in various stages of their careers are experiencing job insecurity, with concerns about being replaced by younger, more energetic employees. This trend, known as the “curse of 35,” is particularly prevalent in the tech industry.
The Chinese government is aware of the need to shift the focus of the country’s development away from the property sector and towards consumption. Despite efforts to boost household spending, data shows that the savings rate is at an all-time high, and consumer confidence remains low. Treasury Secretary Janet Yellen recently visited China to discuss manufacturing overcapacity, sparking tensions over accusations of foreign governments trying to suppress China’s development. The reluctance of Chinese consumers to spend could have implications for global markets.
Many Chinese consumers, like Vika Chen, are adjusting their spending habits in response to the economic uncertainties. Chen prioritizes value for money and opts for cheaper alternatives, exchanging clothes with friends and buying from discount platforms. She emphasizes the importance of mindset and prioritizing personal happiness over living a luxurious lifestyle. The financial pressures facing the middle class are leading to a shift in consumer behavior, impacting industries like luxury brands and prompting a trend towards more frugal spending habits.
