A flood of stimulus measures has boosted consumer confidence in China, yet the rebound remains uncertain and could falter due to a potential trade conflict with the United States.
In recent months, China has implemented various measures designed to increase domestic spending as authorities seek to strengthen the economy during the escalating trade dispute with the U.S. This multipart series explores the effectiveness of these initiatives, starting with an examination of consumer attitudes in China for the current year.
Last year, Linda Wang, a 45-year-old corporate executive based in Shanghai, was forced to adopt extreme tactics to control her expenses by prohibiting herself from making purchases of non-essential goods for several months.
Driven by concerns over the economic situation, she embarked on a personal savings campaign as reports of widespread layoffs and wage reductions circulated throughout China.
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“At that point, I was extremely concerned about the possibility of not receiving payment on schedule, and anticipated that my end-of-year bonus could be cut down to half of what it had been in prior years,” she remembered.
However, circumstances have improved recently. Wang ultimately received her salary checks promptly and was pleasantly surprised with an unexpectedly generous bonus—only a 15 percent decrease from previous years.
Moreover, she has seen an on-paper profit of 10,000 yuan ($1,380) with her current 50,000-yuan stock investment for this year, following an on-paper deficit of 10,000 yuan last year.
To mark the occasion, Wang chose to be more generous with her spending. In January, she purchased an iPhone 16 for around 6,000 yuan and also got herself an annual pass to the Shanghai Disney Resort.
I’ve somewhat cut back on expenses — instead of opting for the top-tier iPhone, I went with a more cost-effective choice,” she explained. “While I wouldn’t say I’m extremely confident, I do feel less worried now.
In recent months, many residents in China’s key urban areas have echoed Wang’s feeling of guarded hopefulness, following a series of governmental actions aimed at reviving economic activity and encouraging spending, which appear to be yielding positive outcomes.
Beijing has made
raising domestic spending
a top priority as it strives to make the Chinese economy more resilient in the face of an intensifying trade war with the United States, which is already impacting the country’s export sector.
These policies have persuaded certain consumers to spend more freely; however, the recovery is still uncertain. It remains unclear whether it can endure the economic impacts caused by US President Donald Trump’s retaliatory tariffs.
reported a 34 percent rise
on Wednesday, imposed duties on Chinese products, with Beijing
imposing retaliatory tariffs
Of an equal quantity the day after next.
New findings from Deutsche Bank indicate that Chinese consumer sentiment is gradually recovering, albeit inconsistently, after a challenging year in 2024. Urban dwellers are showing greater optimism regarding their income prospects and increased readiness to purchase non-essential items.
In the initial three months of this year, 54 percent of participants reported feeling more prosperous than they did at the same time last year, as stated by Deutsche Bank in a March publication. This percentage was higher than the 2024 average of 44 percent.
In the meantime, the percentage of individuals anticipating an increase in their income rose for the third successive quarter, hitting 60 percent.
This boost in consumer optimism – notably observed among individuals above 35 years old and inhabitants of China’s leading metropolitan areas – is “probably due to the fact that the older demographic gained more from the rise in asset values,” according to the bank.
Families have experienced an improvement due to a minor recovery in the real estate sector in China’s premier urban centers over the past few months, along with a modest rise in market optimism spurred by Beijing’s beneficial economic strategies.
In the meantime, the enthusiasm sparked by DeepSeek’s release of its innovative AI model in January has attracted worldwide focus to China’s technology industry.
fuelling a rally
In both the Hong Kong and Chinese stock markets.
Nevertheless, the economy has not shown signs of a strong recovery yet. Areas where public sector employers make up a significant portion of jobs are currently experiencing better performance overall, according to Xu Tianchen, who serves as a senior China economist at the Economist Intelligence Unit market research company.
Xu mentioned that the resurgence in Beijing and Shanghai can largely be attributed to the internet industry, whereas financial institutions, international businesses, and privately owned companies continue to encounter difficulties as a whole.
In recent months, the Chinese government has directed fresh attention towards rejuvenating the private sector and increasing domestic consumption, with authorities taking steps.
launching large-scale trade-in programmes
And subsidy programs that have led to a notable increase in the sale of cars, household appliances, and electronics.
Gloria Zhang, a young professional in her mid-twenties working in the pharmaceutical industry in Shanghai, has benefited from these new policies. She has purchased a TV, a washing machine, and a smart doorbell at reduced prices, allowing her to save between 15% and 20% off the usual retail cost.
“Without the subsidies, I probably would have postponed these purchases until next year and bought only about a third of what I did now,” Zhang said. “From a personal perspective, the overall demand remains the same – buying earlier just means I can enjoy them sooner.”
Zhang mentioned these acquisitions were more focused on smart savings rather than extravagant spending, since she remains cautious with her finances due to increasing instability in the pharmaceutical sector.
Wang, who manages operations in Shanghai, mentioned that the trade-in program prompted her to make purchases—though only modestly so.
In March, she utilized the subsidies to purchase an electric wheelchair for around 4,000 yuan for her ailing elderly father, who has lost his ability to move around.
She mentioned that her parents considered the wheelchair unnecessary, and they would not have approved of her purchasing it if not for the government subsidy, which provided roughly a 25 percent discount.
Right now, I’m not expecting an unreasonable increase in my salary or a more generous bonus this year, but I do believe that we’ve seen the worst of it.
Although subsidies for products such as home appliances have provided clear benefits, experts caution that these measures offer only temporary relief. There is concern that significant reductions in prices of durable goods might ultimately erode future demand, potentially causing difficulties for companies down the road.
Xu from the EIU stated that it remains unclear if the recently observed increase in consumer spending can endure. He emphasized that sustaining a prolonged economic rebound will depend on ongoing policy measures and a prompt transition toward services-based consumption.
Xu mentioned that “The positive aspect is, leaders are dedicated to adapting policies flexibly according to the economic situation midway through the year.”
The resurgence in consumer confidence occurs in two phases: initially, individuals become more inclined to use their earnings for expenditures rather than savings, a transition that has commenced; subsequently, they start considering borrowing funds to make purchases—a development that appears distant in the near future.
At the beginning of this month, China unveiled a detailed 30-point strategy aimed at increasing domestic spending. This initiative suggests that the government plans to implement long-lasting structural changes designed to transition the economy towards one driven more by consumer demand rather than investment and exports.
The approach—which experts
referred to as the most inclusive strategy
To boost consumer expenditure starting from the 1970s — involved steps to address persistent problems hindering household spending, including expensive childcare expenses, delayed business payouts, and instability in real estate and equity markets.
However, certain experts still have reservations regarding near-term expenditure prospects. A document released by UBS last month indicates that meager household income and wealth forecasts may persistently burden consumer spending, even with increased incentives through the trade-in scheme.
The findings underscore limitations in overall spending capacity. The document indicates that despite the upturn in financial market recovery and an increase in property sales during the last quarter of 2024, these improvements have not yet led to widespread growth in household earnings.
Dong Han, who works for a state-run company in Beijing, shares a pessimistic view. He continues to closely monitor his spending and remains cautious about making investments since he doesn’t see much indication that the economic situation will improve soon.
“I notice stores closing frequently—when one shuts down, another opens up but eventually closes as well,” he stated. “This constant change is disconcerting.”
Although current stimulus measures have encouraged consumers to spend, Han thinks that most individuals are utilizing these policies to save funds instead of splurging.
By participating in the trade-in program for his vehicle, he aims to achieve this goal, which might save him more than 10,000 yuan. However, as a rule, he intends to purchase only what he absolutely needs.
“I haven’t seen a change in my income yet, but… just because I’m not impacted today doesn’t guarantee I’ll be shielded from the repercussions down the line,” Han stated. “This cascade of events creates an unsettling level of unpredictability, which concerns me the most.”
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The article initially appeared on the South China Morning Post (www.scmp.com), which is the premier source for news coverage of China and Asia.
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