Consumption Downgrade Hot Topic, But MOFCOM Dismisses

LA Times: Hard-pressed Chinese consumers are key to keeping the world's second-largest economy on track
Consider Fu Ran, a 29-year-old architect in Beijing. His rent already sucked up about half his monthly income when he was told last month that it would increase 30%, to 4000 yuan ($586) a month. Although he trained at the prestigious Tsinghua University nearby, Fu now mocks himself as "highly educated but broke."

With few funds left each month, Fu says he’ll have to cut expenses on dining out, socializing and travel. His case resonates with the so-called consumption downgrade that’s become part of social media chatter. But as consumption, including some government spending, now contributes more than two-thirds of annual output growth, such a development matters for policy makers.

Elsewhere, though, things are different, and the massive shift of China’s population upward in the wealth stakes continues. Although retail sales growth slowed sharply in 2018 to below 9% year on year, that may not capture the full picture. Indeed, spending as recorded by the government’s quarterly household survey has accelerated.

“Many people might feel the pressure to cut expenses, for example like young graduates hit by the rising rents, or the savers who lost money due to defaults of peer-to-peer lending platforms,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp Ltd. in Singapore. “But if you look at spending on overseas tourism, which is a good indicator of how wealthy people feel about themselves and how optimistic they are, the number is quite sound.”
Global Times: Talk of consumption downgrading in China inaccurate: MOFCOM
"Regarding the talk of a consumption downgrade, I think it is inaccurate," MOFCOM spokesperson Gao Feng told a press briefing, arguing that recently improving sales of some mass market products indeed reflected a new trend in the country's consumption upgrade.

As many recent indicators have pointed to downward pressure in the world's second-largest economy, some media reports have claimed that China's middle class - formerly big spenders at home and overseas as they chased high-end products - were economizing by buying cheaper products.

But Gao said that better sales of cheaper goods are not a consumption downgrade but instead a sign that consumers can buy more affordable products with better quality and reputation. He added that the fast development of e-commerce has expanded sales channels for shoppers in small towns and rural areas.
是“消费降级”还是“结构升级”? 数据有话说

Wang Yao believes that whether it is Erguotou or mustard or group buying and sharing bicycles, the increase in sales of any of them is not enough to be a comment on “consumption downgrade”. Consumers have a variety of consumer appeals and expressions, and their consumer targets are both luxury goods that represent identity and low-priced goods that represent affordable and durable.

For example, in the recent rise of shared bicycles, it is not a special product for young men and women. Many middle-class and even wealthy people in the city will also use it. People choose it, in addition to enjoying a convenient experience, there are also energy-saving, environmental protection and fitness considerations. . It seems that sharing bicycles should also be seen as a materialized body of consumption upgrades.

According to data released by the Ministry of Culture and Tourism, the number of domestic tourists reached 2.826 billion in the first half of the year, an increase of 11.4% year-on-year. Domestic tourism revenue was 2.45 trillion yuan, an increase of 12.5%. In the first half of the year, the national movie box office was 32.03 billion yuan, and the number of people watching the movie reached 901 million, an increase of 17.8% and 15.3% respectively.

From the perspective of the overall consumption structure, the current service consumption including tourism, culture, sports, pension, and housekeeping has accounted for more than 40% of the domestic consumer spending. In terms of consumption quality, Jingdong Big Data shows that in the first half of 2018, compared with the same period in 2016, the number of users participating in high-end consumption has significantly expanded, and the cumulative number of orders placed has increased by 91%.

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