confidence falls in China

19 November 2010

BEIJING: Consumer confidence levels have declined in China for the first time in 18 months, a new report has found.

Based on the views of 3,500 adults, the National Bureau of Statistics and research firm The Nielsen Company revealed popular perceptions fell to 104 points in Q3 2010 from 109 points in Q2.

Rural markets were primarily behind this shift, with sentiment declining from 117 points to 106 points quarter-on-quarter, while panellists in fourth-tier cities also appeared more pessimistic.

A major source of anxiety was linked to the rising cost of food following a 10.1% surge in October on an annual basis.

"Inflation has been triggered mainly by increases in food prices which has pushed up inflation expectations, especially among low-income workers," said Pan Jiancheng, deputy director general of the National Bureau of Statistics.

"It's much easier for food-driven inflation to boost overall inflation expectations because food has such a high weight in the CPI and is very sensitive in people's lives."

In all, 76% of interviewees thought prices would continue to climb during the coming year, compared with 70% in the last research round, and peaking at 89% in the countryside, an 11% rise.

"Consumers' perception related to increasing prices is the key factor that drove the result we measured in consumer confidence," said Mitch Barns, Nielsen's Greater China president.

One consequence of this trend is a drop off in purchase intent, with the NBS/Nielsen study arguing many customers are "less willing to buy."

The report added: "Price hike expectations have dampened consumers' willingness to consume ... Only 41% of the survey respondents think it is the right time to buy now, a fall of 11 percentage points from the second quarter."

Despite this, the barometer of public optimism was unchanged in top-tier cities, a group including Beijing and Shanghai, and rose in second and third tier areas.

"When we measure consumer confidence later this year for the fourth quarter, it wouldn't surprise me to see consumer confidence to just remain stable or declined a little bit more," said Barns.

"But if we look beyond that into 2011, I would expect things will probably turn more positive again because we've seen such strong growth in China's tier-two, tier-three cities [and] in central China, which represents a huge portion of the population."

Contributors were also largely upbeat about the condition of the domestic economy, and nearly 70% believed their employment situation should improve in 2011.

"We think consumer sentiment is still healthy and satisfactory," Pan said.

Data sourced from Bloomberg/CCTV; additional content by Warc staff