BEIJING - A noticeable shift is occurring among Chinese consumers as economic uncertainty continues to influence spending behaviors, particularly among the younger generation. This change, rooted firmly in the experience of the pandemic and the ensuing property market crisis, reveals Gen Z's increasing preference for saving over spending.
Social media platforms such as Xiaohongshu, often compared to Instagram, have become hotspots for discussions about frugality. Many users under 30 are exchanging advice on how to cut costs, from saving on office lunches to finding bargains. Influencers on the platform advocate for financial discipline as a valuable lifestyle. Posts related to money-saving tips have garnered more than 130 million views, with approximately 1.5 million contributions.
Ava Su, 26, who commented on her recent job acquisition with Alibaba, reflects the sentiments of her peers: "I feel like the economy is quite bad, and it seems like it's hard for everyone to make money, so I think it's important to protect my own wallet." Su's cautious approach extends to her personal finance goals, as she aims to save up 2 million yuan (around $273,512). This cautious behavior signals how today's young workers perceive economic stability as elusive, leading them to adopt long-term saving strategies.
Data from Yu'e Bao, part of the popular Alipay payment app, shows a significant change among users born after 2000. On average, they made 20 deposits monthly by the end of 2024, which is double from just months prior. Users' account balances also saw increases, reaching nearly 3,000 yuan—50% more than last year. These numbers reflect the heightened awareness among youth about financial security.
Economists warn, though, this entrenched savings behavior might pose risks to China's economic recovery efforts. Sustained consumer pessimism can lead to decreased spending across various sectors, threatening to undercut measures aimed at revitalizing domestic consumption. Professor Ho-fung Hung from Johns Hopkins University draws attention to this cultural shift, stating, "This loss of optimism is a first since the beginning of (China's) market reform in 1978." Hung highlights how younger generations are increasingly anxious about economic prospects, starkly contrasting the spending habits of earlier cohorts.
Job security concerns have prompted many young people to apply for positions perceived as stable, especially within government or state-owned enterprises. The youth unemployment rate hit 21.3% in June 2023, showcasing the challenging job market for those aged 16-24. Even as rates were recalibrated to 15.7% by December, the impact of high unemployment deeply influences consumer attitudes.
Lily Li, another representative of the younger generation, epitomizes this frugal mentality. A high school English teacher by profession, Li saves 80% of her monthly salary—significantly reducing expenditures on luxuries such as clothes and concert tickets. Originally targeting corporate careers, she made the switch to teaching for perceived job security but continues to seek other opportunities.
This existential anxiety among Gen Z manifests itself through terms like "tang ping" or "lying flat," indicating resignation to the pressures of modern life. Sociological commentary reflects on this cultural phenomenon of "involution," illustrating the competition and stress of maintaining relevance and success under dire economic circumstances.
The luxury market has undeniably felt the repercussions of these changing attitudes. Swatch, the global watch manufacturer, reported significant declines with sales dropping by 12% and profits plummeting by 75% last year. The group cited "a persistently difficult market situation and weak demand for consumer goods overall in China" as primary reasons for these disappointing figures. Swatch's assessment of the Chinese market noted sales fell by approximately 30% across China and Southeast Asia, regions heavily dependent on Chinese consumer habits.
Industry patterns indicate this slump is not isolated to Swatch; luxury brands such as LVMH and Kering have reported their struggles, too. Overall luxury spending stagnated throughout 2024, leading to stock price drops across major firms, marking both diminished consumer confidence and fading economic buoyancy. The overall trend sees the luxury goods sector grappling with adjustments as they react to the changing mindset of Chinese consumers.
Gary Ng, senior economist at Natixis, predicts the continuing trend of consumer conservatism may result in intensified price competition and increasing deflationary pressure as firms strive to balance weakened demand. This situation could prompt lower spending across various markets within China, indicating potential long-term consequences for the country's economic growth potential.
While China recorded GDP growth of 5.0% for 2024, expectations indicate this rate may slow over the next few years. The cautious financial attitudes of the younger generation stand as both an adjustment to their current realities and also as reflections of broader socio-economic trends reshaping not only consumption patterns but the overall growth trajectories within China.