- Recently released household consumption data emphasizes again the lost trust of Chinese consumers. Average consumption expenditures decreased by 0.2 percent in real terms in 2022 compared to the previous year, showing the negative consequences of the stringent covid restrictions.
- Chinese households spend 31 percent on food and beverages, an area expected to quickly recover post Covid measures. Recovery will be harder to achieve for the 24 percent spending on housing and 13 percent spending on transport and communication. Chinese households have especially held back on less needed consumption, such as clothing and cultural activities.
- Consumption levels fell despite an increase in available income. The disposable income of households grew by 5 percent in 2022 compared to 2021. After adjustment for inflation, the real growth is 2.9 percent with average household income reaching 36,900 RMB. Among different income sources, wages contribute to around 56 percent of total household income (20,600 RMB).
- Still, the disparity between provinces is increasing as the economically developed provinces such as Beijing, Shanghai, Zhejiang and Jiangsu experienced strong growth of income since 2014.
- However, income grew much less in economically weaker regions such as Jilin, Yunnan and Gansu.
- FIEs who are relying on the less developed areas in China as new growth drivers and releasing consumption potential may need to be more patient before the income prospects are enhanced in such areas.
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.