Focus topics


Zero Covid could cause lasting damage to consumer confidence

Dieser Inhalt ist Lizenznehmern unserer Vollversion vorbehalten.
  • After many years of stability, consumer confidence in China has fallen to a historic low in the last two months. This dramatic degree of decrease in confidence has not been seen even when the Covid pandemic first hit China in early 2020
  • China’s GDP only grew at 0.4 percent in Q2, 2022. It is very likely that China’s economy will incur near zero growth again in Q3 based on current trajectories. 
  • The August stimulus package is proving insufficient to turn the economy around. It is mostly targeted toward public infrastructure spending and lacks the needed support measures to revive consumption. ​
  • If the Chinese government does not deviate from its Zero Covid course, China could possibly even run into an economic recession for the first time in decades. ​
  • This could mark a new era: Except during the first covid lockdown, when the economy shrunk by 5 percent in Q1 of 2020, the Chinese people have been used to a minimum of more than 5 percent growth, often going into the double-digits.​
  • Even if Zero Covid policies are lifted or significantly relaxed in the near future, the Chinese government will have a very difficult task restoring consumer confidence. ​
  • The overall consumer confidence deterioration may in fact not be short-term. Households have a markedly more pessimistic view regarding the long-term prospects of the economy and, consequently, their individual income expectations. This cannot be easily reversed by temporary stimulus packages. ​

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.

Related

    Social credit law already affects companies
    Will the digital yuan become an international model?
    Foreign investors welcome in China’s ports
    Xi focuses favors national security over growth