China’s middle-class families remain cautious about spending – particularly on property – despite repeated government efforts to loosen household purse strings, according to a university study.
In their quarterly survey of household wealth and income released on Thursday, researchers at Southwestern University of Finance and Economics in Chengdu, Sichuan province, found that their index of families’ future spending expectations was even lower than the early days of the Covid-19 pandemic.
In the China Household Wealth Index Survey conducted by the university’s Survey and Research Centre for China Household Finance, the index of spending expectations fell to 101.9 in the first quarter of this year, down from 103.0 in the fourth quarter of 2023.
A reading of 100 is the dividing line between expansion in spending plans and contraction.
The latest reading is even lower than the 102.6 result for the second quarter of 2020 when the coronavirus pandemic began to bite the economy.
The survey measures the spending plans of households with an average of 1.5 million yuan (US$207,000) in combined property and financial assets, and an average household income of 170,000 yuan.
With exports facing external headwinds and in debt weighing on investment prospects, Beijing has pinned high hopes on consumption helping to drive the economy.
China’s GDP expanded 5.3 per cent year on year in the first quarter, with domestic consumption contributing 73.7 per cent to economic growth, according to the National Bureau of Statistics.
Retail sales of consumer goods, a major indicator of the country’s consumption strength, rose 4.7 per cent year on year in the first quarter of this year.
But outlays in discretionary areas such as travel and entertainment have largely remained at pandemic lows, although rising to 99.6 in the first quarter from 97.5 three months earlier.
The families in the survey were particularly cautious about buying real estate, with the proportion of households buying new homes falling to 6.4 per cent in the first quarter of this year from 7.5 per cent in the final quarter of 2023.
Only 6.8 per cent of households said they planned to buy property in the next three months, while 20.1 per cent of households said they would take a wait-and-see approach, the survey found.
The fall reflected a broader decline in investment in the country’s real estate sector, which fell 9.8 per cent year on year in the first four months of 2024, according to the National Bureau of Statistics. The amount of floor space sold fell 20.2 per cent in the same period.
However, expectations about economic prospects rose a little.
The report on the university’s survey also said that 62.3 per cent of respondents were not optimistic about economic prospects in the next 12 months, down slightly from 66.4 per cent three months earlier.
Expectations of job stability were still in the contraction range below the threshold 100, at 98.3, but better than 95.8 in the previous quarter.
Household debt across all income groups rose, particularly among low-income households with an annual income of 100,000 yuan or less.
The authors of the report said the results reflected greater economic pressure faced by these households and authorities should consider tax incentives for middle- and low-income families to ease that burden.
While the surveyed households showed enthusiasm for investing in precious metals, enrolments in the national private pension scheme launched in November 2022, did not meet policy expectations. By the end of last year, 50 million people opened personal pension accounts, but only 22 per cent of the account holders had actually made deposits, the report said.
About two-thirds of respondents cited a lack of understanding of the policy or concerns about policy changes, and 32.6 per cent were worried about being unable to withdraw investments before retirement or limited tax incentives.
