China’s wealthy citizens show no sign of cutting back on their spending amid the ongoing trade war and economic slowdown, with a recent survey showing more than 80 per cent plan to spend at least the same amount as last year.
The results paint a slightly different picture from headline economic indicators pointing to a weakening retail sales growth.
The survey, conducted by the HSBC before this month’s Lunar New Year holiday, questioned over 2,000 Chinese consumers with an annual income of at least 150,000 yuan (US$22,341), with more than half the sample women and more than half aged between 18 and 34.
About two thirds of the consumers surveyed have annual incomes ranging from 150,000 yuan to 240,000 yuan (US$35,746) per year, with the remaining third earning more than 240,000 yuan annually.
According to Chinese National Bureau of Statistics (NBS), people with monthly income above 10,000 yuan – or an annual income over 120,000 yuan – are classed as having a high income.
China plans to offer subsidies to encourage consumers to buy new cars and develop countryside tourism in a package of stimulus to boost domestic demand.
“Domestic consumption has already become a key growth driver in China, contributing 5 percentage points to the 6.6% gross domestic product growth in 2018,” said Julia Wang, Greater China economist from HSBC.
“Consumption growth is likely to remain steady in the coming years, thanks to both steady growth in income and a healthy household balance sheet.
“The service sector is still likely to grow more robustly on a trend basis, due to changing consumption patterns of urban middle class consumers, improving transportation networks, and digitalisation.”
Wang argued that household debt was not that alarming and that the impact of the trade war on the job market would be limited as long as the service sector kept hiring.
More than 70 per cent of participants of the survey still expected their incomes to increase this year, with the government set to keep rolling out policy easing measures to prop up the economy.
December’s consumer confidence index, based on a monthly survey from NBS, rose back to the same level from the beginning of the year after taking a deep dip in the middle of the year.
“On a more granular level, the theme of a constantly evolving middle class shows through strongly. Service consumption, which we have argued is an increasingly key component of urban consumption, remains very popular,” added Wang.
“In particular, urban households are increasingly keen to consume in areas of travel, leisure, health care and education.”
When it comes to luxury spending, China’s stock market performance seems to have a played a bigger role than job security and housing price in influencing spending habits.
About 17 per cent of respondents said a stock market rally would lead to buying more luxury goods.
Since the beginning of the year, China’s benchmark Shanghai Composite Index has risen more than 15 per cent.
Travel, cars and clothes were the most popular items, according to the survey.