How coronavirus is changing what Chinese consumers buy

Chloe Ni used to go to coffee shops every two days before the coronavirus outbreak. Now, she makes coffee at home, and even decided against getting an expensive Moka stove-top pot to make her daily brew.

“I work in the service sector, which sustained the biggest shock from the coronavirus, and we had almost no business for two months. I am cutting my spending on almost all aspects as the virus has suppressed my passion for shopping,” said Ni, a 34-year-old who runs a Beijing-based photography studio whose major clients are hotels and property developers.

In addition to reducing her visits to cafes, Ni said her company also started looking for second-hand equipment on Xianyu, an online flea market, instead of buying new items. It’s a trend that Ni said could last for the next two years as she feels pessimistic about China’s economic recovery.

In a southwestern Chinese city, Rocky Chen, who runs a live music venue, says he is predicting he’ll make a loss this year. Chen had to close his venue again this week, after it had been allowed to re-open for six days, due to concerns that the virus could return for a second wave.

“People will go out eventually, but I don’t think they will spend more. Only one thing I could say for sure, is that this is going to be an extremely tough period, as the shadow cast by the virus on people’s desire to go out and spend will last at least half a year,” he said.

Ni and Chen’s sentiments could pose difficulties for the Chinese government’s hopes that its citizens will take part in “revenge shopping” to re-boot the economy as the spread Covid-19 appears to be subsiding there. The term, which has been trending on Chinese social media of late, is sometimes used (link in Chinese) to describe the surge in spending that occurred in the aftermath of the devastating Cultural Revolution launched by Communist leader Mao Zedong, which ended in 1976.

Data show that China is possibly facing its starkest economic downturn since that tumultuous period—retail sales in January and February dropped 20.5% from a year ago, the first decline since records began. In February, China’s car sales plunged 79% from a year earlier, the biggest-ever monthly decline. GDP growth for the first quarter could turn negative.

Even prior to the coronavirus outbreak, China’s economy posted the slowest pace of growth in nearly 30 years. In some sectors, such as tech, mass layoffs had already been in motion.

A recent survey (link in Chinese) conducted by Cefuture, a Chinese consulting form focused on logistics and transportation, found that 41% of nearly 1,000 participants said they would reduce spending to prepare for future crises, while 51% said they would work harder to make more money. Only 8% expressed willingness to do more shopping after the outbreak. In another survey (link in Chinese) of 949 people conducted by investment bank China Renaissance, 68% of people say they expect their income this year to be lower, further dampening consumer appetite.

Chinese officials have long highlighted consumption as the most important driver for economic growth, as the country continues to try to shift away from an export- and infrastructure-driven economy. Consumer spending made up about 58% of the country’s GDP growth in 2019. One measure being taken by local officials to boost spending is to issue low-value digital coupons that can be used for things such as travel and dining.

“Chinese consumers are still more optimistic compared with those in Europe and the US since they have more or less survived the worst period of the coronavirus outbreak, but it is more about the future,” said Jason Yu, Shanghai-based general manager of consumer consulting firm Kantar Worldpanel. Yu said people are worried about a potential second wave of the pandemic, while weakening global demand is also keeping people on edge. Some major global clients, for example, are canceling factory orders in China.

Shirley Xie, who works as an administrator at a university in Chongqing and who just gave birth to her second child in January, is facing difficulties paying down a mortgage as her husband hasn’t had any income for two months from his construction job. She said she has cut all non-essential spending and has been turning to her parents for financial help. She said she would continue to cut spending on clothing and make-up.

The trend of frugality may even be here to stay, just as financial prudence became ingrained in the minds of those who came of age after the 2008 financial crisis. The term duansheli, a phrase borrowed from Japanese which means to cut off trivial things, is also trending in China at the moment. One user on Zhihu, China’s version of Quora, wrote under (link in Chinese) a discussion about revenge spending, “I used the lockdown period to clean out my flat thoroughly and duansheli lots of clothes and expired items. I’ve decided not to buy any more clothes and skincare products for the rest of the year.”