Pandemic will alter consumption patterns in China

Significance

The rate of decline has slowed in recent months, but household demand remains weak. Consumer optimism is more positive than in many other countries hit by the pandemic, but remains negative for many discretionary categories.

Impacts

• The government’s abandonment of a growth target for this year indicates that the priority will be employment rather than GDP growth.
• The direct effects of fresh COVID-19 outbreaks will be local, but their psychological impact will affect consumption nationwide.
• The government is unlikely to worry about the effect on economic ‘rebalancing’ unless signs emerge that this is not just temporary.
• The young are disproportionate drivers of consumption in China; the psychological effect of the pandemic on these cohorts may be decisive.