China is currently navigating a series of economic hurdles, prompting governmental efforts to encourage increased spending among the next generation of consumers for the collective benefit. However, these appeals have met with limited success.
Authorities have identified insufficient domestic consumption as a factor impeding economic growth, a concern particularly acute among recent graduates who face significant financial uncertainties.
With youth unemployment rates hovering near 20% for a prolonged period, job security remains a pervasive worry. Furthermore, the ongoing real estate crisis casts doubt on the feasibility of homeownership, especially in major urban centers.
This climate of uncertainty is fostering a trend of frugality among China’s youth, with social media platforms becoming a repository of advice on how to manage on limited budgets.
“My work is dedicated to a minimalist way of life,” shared one full-time influencer with the BBC.
The 24-year-old, known online as Zhang Small Grain of Rice, creates videos showcasing practices such as using a single bar of soap for all personal hygiene needs, as opposed to more expensive cleansing products.
She also offers tours of shopping districts, highlighting clothing and other items she deems valuable due to their durability.
Companies compensate her for featuring their products to her 97,000 followers on the Xiaohongshu platform.
“I hope more people will understand consumption traps so they can save. This will reduce their stress and relax them,” she stated.
Others focus on economical eating habits.
A 29-year-old content creator, using the alias Little Grass Floating In Beijing, posts videos demonstrating the preparation of simple, low-cost meals. He claims to be able to eat two meals for just over $1 (76p).
“I am just an ordinary person from the countryside. I have neither a good educational background nor a network of influential contacts, so I must work hard for a better life”, he tells his followers.
Employed by an online sales firm, he attributes his frugal lifestyle to having saved over $180,000 in six years.
When questioned about whether he would expect his future family to adopt similar practices and what his ultimate goals are, he responded, “I don’t know”.
China has long been recognized for its robust economy, weathering the pandemic and trade disputes with the United States.
However, analysts suggest that sustained economic growth hinges on boosting domestic consumption.
In contrast to the United States’ struggle with consumer debt, China faces the opposite challenge: a propensity for saving, which intensifies during periods of perceived economic uncertainty.
Despite the government’s repeated pledges to stimulate household spending, it remains at approximately 39% of gross domestic product (GDP), significantly lower than the roughly 60% observed in most developed nations.
A contributing factor is the prevailing pessimism among today’s youth compared to previous generations.
“Right now, making money is more important to me. I actually need to expand my income sources and cut my costs,” a young woman in central Beijing told the BBC.
She added that her salary, like many others, has been reduced.
“I changed jobs, and it doesn’t pay as well. Also, I don’t know for how long this new job can sustain me in the future. A bad economic environment like this makes people feel down because we’re not earning very much. Finding a job in the first place also isn’t easy.”
High youth unemployment not only breeds insecurity but also empowers employers to reduce wages, given the competitive job market.
Another young man in his 20s noted the availability of low-level positions but difficulty in securing meaningful employment within one’s field of expertise.
“Some of my friends are unemployed, still living at home and looking for a job,” he says.
“They had all kinds of majors at university from financial services to product sales. The economy is a bit off right now. I hope it gets better so we can all have a better life”.
When asked about the likelihood of near-term improvement, he admitted, “I’m not very optimistic.”
A key challenge for China’s recent graduates is the country’s transition from a mass producer of inexpensive goods to a high-tech economy. These emerging industries often require fewer workers.
Economist George Magnus, an associate at the China Centre at Oxford University, has been monitoring this trend.
He highlighted data from two prominent recruitment firms in Beijing indicating a high number of university graduates, including those with master’s degrees, accepting positions as delivery drivers.
“It reflects the skills mismatch between the qualifications which people are leaving higher education with and what’s out there in terms of demand for labour,” he says.
“Of course, that’s not being helped by the push to become a champion in robotics and AI because, at least for the time being, this is something of a dampener on job opportunities. Tech isn’t really that labour intensive.”
Helena Lofgren, who studies China’s consumption patterns for the Swedish Institute of International Affairs, argues that the economy’s over-reliance on investment in specific industries and export-oriented strategies in a volatile geopolitical landscape is unsustainable.
“People save more than they consume, and you need consumption to make up a bigger share of the economy than it’s doing today in China,” she says.
“You have a very export-oriented and investment driven economy and what we see now is that these parts are too big for the economy to stay healthy.”
Ultimately, it is a question of economic balance. If China were to experience a significant decline in export revenue, would it have the mechanisms to offset this by empowering its vast domestic population?
Some observers have questioned the government’s commitment to boosting domestic consumption.
While the country has prospered under an investment and export-driven model, this approach is now confronted by a major challenge: deflation. Potential consumers are frequently delaying purchases in anticipation of lower prices.
For instance, a young couple considering the purchase of new furniture may reasonably postpone the purchase to secure a better deal.
The longer they, and others like them, defer significant purchases, the more likely businesses are to lower prices, further incentivizing consumers to delay spending.
While cheaper goods may seem appealing, deflation can drive businesses into bankruptcy and hinder overall economic growth.
This cycle could be broken by fostering optimism among younger consumers, potentially through enhanced social safety nets or increased minimum wages.
Previous efforts to stimulate spending through incentives for replacing older vehicles, appliances, and other items have yielded limited results.
Influencer Zhang suggests that financial prudence is ingrained in Chinese culture.
“My grandfather’s generation was very frugal, very thrifty. It is part of Chinese tradition. For Chinese people to be economical is in their bones,” she concludes.
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