Tourists visit ice sculptures on New Year’s Day 2023 in Harbin, Heilongjiang province.
China News Service | VCG | Getty Images
BEIJING – Despite the sudden change in direction of China’s reopening, it is going to take time for Chinese consumers to actually start spending again.
About a month after in-store dining resumed in downtown Guangzhou, local coffee shop owner Timothy Chong said revenue was recovering — 50% of normal levels.
“At the end of December, customer flow gradually returned to normal, with a slight upward trend, but [a recovery in] The trading volume still needs to wait,” he said in Chinese, as translated by CNBC.
He expects it to take at least three or four months for the revenue to return to normal. Chong said that for the past six months, revenue had dropped to 30% of normal levels. He said that the first store of Bom Bom Coffee will open in late 2019, followed by the second store and Coffee Academy in August 2021.
Official data showed China’s retail sales were down slightly for 2022 through November. Consumption has lagged behind overall economic growth since the pandemic began nearly three years ago.
For the year ahead, Bain partner Derek Deng tempered expectations. “Hopefully we will be back to at least the first quarter of 2022 levels,” he said, noting that Shanghai was just before the lockdown.
Retail sales for the first three months of 2022 were up about 3.3% from a year ago, but declined 0.7% in the first half of the year, according to Wind Information.
Deng said a return to 2021 – when retail sales are expected to rise by 12.5% - would be an optimistic scenario. “I don’t think people are looking at this as a base case, mostly because the macro factors are actually less favorable than in 2021.”
Large chunk of Chinese household wealth tied up in real estate, once a hot market fell last year. Mainland Chinese stock market fell in 2022 for the first time in four years. Exports, a driver of China’s growth, have begun to decline in the past few months due to a slump in global demand.
Deng also notes fears of a second Covid wave, highly contagious XBB omicron subvariant Coming from overseas and geopolitical uncertainties.
“I think that’s also impacted by people’s perceptions on their disposable income, or whether they need to save to weather all that uncertainty,” he said.
Chinese consumers’ penchant for saving hits record high Last year, according to the People’s Bank of China survey.
travel rebound expected
Analysts are closely watching the upcoming Lunar New Year holiday for signs on consumer sentiment. According to official estimates, the travel season for China’s big holidays this year runs roughly from January 7 to February 15 – with around 2.1 billion trips expected.
China’s transport ministry said on Friday that it has doubled from last year and is 70% of 2019 levels. It is noted that the majority of travel will be to visit family, while only 10% will be for leisure or business travel.
This year, many more Chinese will finally be able to travel abroad. After tightly controlling the mainland’s borders for nearly three years, the country is restoring the ability of Chinese citizens to go abroad for vacation. On Sunday, China also formally removed quarantine requirements for incoming travelers.
However, Chen Xin, head of China leisure and transportation research at UBS Securities, said Chinese travel abroad is unlikely until the next public holiday in early April.
Chen said that by that time, people would be able to process their passport applications while the number of international flights could recover to 50% or 60% of 2019 levels. He said measures such as pre-flight virus test requirements for travel to certain countries could be relaxed in a few months.
Within China, Chen expects a further boost in travel after February, when business trips pick up, with hotel business returning to 2019 levels by the end of the year. It is based on an industry metric that measures revenue per available room.
not everyone is going out
of china Big city streets are getting busier As soon as the first wave of infection passes.
But it is mostly young and middle-aged people who are out and out again, UBS’s Chen said, noting that older people may be more cautious about venturing out.
After a gradual rollback in Covid control, Chinese authorities last month abruptly lifted most of the country’s virus testing and contact tracing measures. However, vaccination rates for China’s elderly have been relatively low. In China, only domestically produced vaccines are generally available.
Bain’s Deng is also looking at whether consumers will start going out more. During the first three quarters of 2022, about 56% of consumer spending was on the home — the opposite of the pandemic trend, he said.
Deng said that if the share of out-of-home spending can increase even a few percentage points, it will affect how malls and restaurants consider their business strategy, especially for delivery services.
Over the past 18 months, the Chinese e-commerce giant JD.com For many products, the delivery window has been reduced from the next day to just one hour. is through a partnership with BapuNow the majority is with JD.
For the period December 16 to January 1, the one-hour delivery platform saw sales of vegetables, beef and mutton nearly double from a year ago, data from the company showed. According to the data, refrigerator sales have increased by 700 percent, while flat screen TV sales have increased tenfold compared to a year ago.