Rich Chinese keep spending while others cut back: McKinsey survey

Pictured here is a science-fiction themed installation at the Maison Hermes in Shanghai, China, on Nov. 28, 2022.

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BEIJING — Wealthier Chinese were more inclined to spend this year, while poorer people cut back on spending even more, McKinsey and Company found in a survey released Thursday.

The divergence contrasts with 2019, before the pandemic, when “there was little differentiation in spending between the two groups,” the McKinsey analysts said. They noted an official measure of consumer sentiment in China dropped this year to an all-time low.

Lockdowns and travel restrictions to control Covid outbreaks in China grew more widespread this year as the more contagious Omicron variant entered the country. A property market slump also dragged down the economy.

However, more than a quarter — or 26% — of people with an annual household income above 345,000 yuan ($49,286), said they increased spending by 5% or more from last year, the survey found.

Only 14% of that income group said they significantly cut their spending.

The more affluent group continues to spend, while lower-income groups are more hesitant and hold spending decisions

The trend reversed for those with far lower income, below 85,000 yuan a year. Just 12% said they increased spending, while 27% scaled back, the report said.

“The more affluent population is more confident about their personal wealth and future prospects,” McKinsey told CNBC in a statement. “They remain relatively more confident about keeping employed in the future and anticipating salary increases in the future. They also typically already have higher savings.”

“So, the more affluent group continues to spend, while lower-income groups are more hesitant and hold spending decisions.”

Across all income categories, the majority — or about 60% — reported no change in spending this year. The share of the wealthiest that said they spent more was also ten percentage points smaller than the 36% reported in 2019.

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McKinsey’s survey of more than 6,700 Chinese consumers was conducted in July.

In the months since, national data on retail sales has slumped as Covid controls tightened in major cities such as Beijing and Guangzhou.

The share of urban households wanting to save “for a rainy day” rose to 58% — its highest since 2014, the McKinsey survey found.

On top of reporting higher savings, more than half of the respondents still expected their household income to increase significantly over the next five years. However, the share ticked lower, to 54% this year from 59% in 2019.

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