BEIJING, Sept 5 — China’s consumer confidence is approaching a historic low as recent short-term measures fail to mitigate the impact of falling asset prices, modest wage growth, and capital outflows, according to investment bank Nomura.
The consumer confidence index for China, the world’s second-largest economy, dropped to 86 in July, a slight decrease from 86.2 in June, according to a report published in South China Morning Post today.
This figure is just above the all-time low of 85.5 recorded in November 2022 during the coronavirus pandemic.
Nomura’s economists, led by Lu Ting, emphasise that more substantial and effective stimulus measures are needed to address persistent issues in the property sector.
“To truly revive consumer confidence, we believe Beijing needs to implement bolder and more effective stimulus measures to address the real problems in the property sector,” they said.
The consumer confidence index, which ranges from zero to 200 with 100 representing a neutral stance, had previously peaked at 127 in February 2021.
The index is based on a monthly survey of 6,480 individuals from 15 provinces, conducted by the National Bureau of Statistics.
Nomura attributes the “sustained weakness” in consumer confidence to several factors, including declining property and stock prices, moderate wage growth, and capital flight amid geopolitical tensions.
Prices for existing homes have fallen nearly 30 per cent from their 2021 high, according to research by the Beike Research Institute.
“The root cause is still the property sector,” Nomura’s economists stated. “The persistent decline in housing prices is severely dampening household balance sheets.”
Chinese consumers are becoming more cautious due to concerns over wage growth and job security, as companies continue to lay off staff to maintain profitability.
Stocks on the Shanghai Composite Index have dropped by 5.9 per cent year-to-date.
Net capital outflows have also surged, reaching US$139 billion (RM605 billion) up to May, marking the worst year since 2016-17, according to French investment bank Natixis.
Core inflation, which reflects consumer spending on non-essential goods, rose by 0.4 per cent in July compared to the previous year, down from 0.6 per cent in June, while the broader consumer price index ticked upwards.
Nomura notes that consumption growth remains below pre-Covid levels, with non-food inflation remaining “largely subdued.”
This aligns with their cautious outlook on the release of pent-up demand.
In response to the economic downturn, China’s State Council released a 20-point directive in early August, aiming to bolster service sector spending.
The measures include increasing support for nursing care, considering an extension of visa-free entries for additional countries, and promoting low-altitude aerial tourism.
Retail sales in China showed some improvement, expanding by 2.7 per cent year-on-year in July, compared to a 2 per cent increase in June.
Despite these efforts, the call for more robust economic interventions remains pressing.
