Chinese consumers remain wary about spending

20 May 2010

BEIJING: Consumer confidence is rising throughout China, but this positivity has not yet translated into improved spending levels among shoppers.

The China Economic Monitoring & Analysis Centre partnered with the National Bureau of Statistics and The Nielsen Company to survey 3,500 people in the country.

Overall, they found that the barometer of popular opinion has returned to levels recorded prior to the onset of the economic downturn, with the score of 118 points matching figures last seen in 2007.

This rating also constituted an uptick of 19 points year-on-year, although perceptions were slightly less favourable in Tier 1 cities like Shanghai, Guangzhou and Beijing, on 106 points.

Elsewhere, totals fell to 105 points in Tier 2 and Tier 3, but climbed to 107 points in Tier 4 and 111 points in Tier 5, and peaked in rural regions.

The assessment among participants in lower income brackets – typically the most pessimistic – also jumped by 12 points year-on-year to 102 points.

Looking to the employment market, 71% of the sample agreed their job prospects for the next 12 months were "good" or "excellent", with 67% saying the same for their financial outlook in this period.

A 58% majority also reported that their expenditure had risen in the first quarter of 2010 compared with the opening three months of 2009, with the grocery and apparel categories benefitting from this trend.

Holidays and eating out were some of the other areas where contributors had boosted their outlay, while clothing, technology and home improvement were set to gain in a similar fashion going forward.

Despite this, only 43% of people believed "now is a good time to spend", off by 3% when measured against the final quarter of 2009.

Mitch Barns, president of The Nielsen Company's operations in Greater China, suggested that events like the Shanghai Expo and Asian Games may work together with other factors to drive consumption up.

"We are hoping shoppers' growing confidence in their ability to earn a living is echoed by an increase in their willingness to spend," he argued.

The desire to spend was most pronounced in Tier 1 cities where earnings are higher, but concerns tied to personal income, health, education and real estate remained widespread across China.

"One hypothesis is that consumers are concerned about price increases, especially for real estate," said Barns.

"If you are saving to buy a property, and housing prices are increasing faster than income, it logically motivates those people to save more and spend less."

Data sourced from The Nielsen Company; additional content by Warc staff