Middle-class spending remains strong
Despite volatility in the domestic market due to China-US trade tensions, the consumption power of the Chinese middle class will continue to grow in a strong manner and support stable economic development, experts said on Tuesday.
Media reports said that mounting debt levels and uncertainty about the economic outlook brought about by the escalating China-US trade row will weaken the Chinese consumer spending.
According to a report recently released by the Institute for Advanced Research of Shanghai University of Finance and Economics, China’s household debt was equivalent to 48 percent of GDP as of 2017.
“We do feel some pressure,” a Beijingbased white-collar worker surnamed Chen told the Global Times on Tuesday. “About 60 percent of our monthly household income goes to pay the mortgage, and I avoid buying high-priced products,” Chen said.
China’s household debt ratio has been driven up mainly by high home prices as most Chinese people can only afford to buy an apartment by borrowing money from banks, said Zhao Ping, director of the Department of International Trade Research at the China Council for the Promotion of International Trade.
Zhao told the Global Times on Tuesday that the debt ratio is a gauge of consumption capacity, and a low debt ratio means stronger consumption. “But the debt ratio is not the only factor, it’s liquidity that really matters.”
Zhao noted that although the China-US trade tensions have cast a shadow over the domestic economy, the consumption capacity of China’s middle class will maintain stable thanks to “stable capital liquidity, a high employment rate and consumers’ sound credit payment capacity.”
In the first half, 7.52 million jobs were created in urban areas, an increase of 170,000 over the same period last year, according to the Ministry of Human Resources and Social Security.
Chen said that “although I’m anxious, China’s economy grows steadily and the country offers many opportunities for individuals’ growth in their careers. I still have faith [in it].”
Besides, China’s debt ratio is far below the levels seen in developed countries like the US, according to Zhao.
Household debt in the US was equivalent to 78.7 percent of GDP in the fourth quarter of 2017, compared with 78.5 percent in the third quarter of 2017, according to data released by the New York-based financial data website tradingeconomics.com.
Ratios in other developing countries like Thailand and Malaysia stood at 68 percent and 67.2 percent in the fourth quarter of 2017, respectively, tradingeconomics.com said.
Liu Aihua, spokesperson for the National Bureau of Statistics, said at a press conference on Tuesday that in the first half of this year, domestic household expenditures on housekeeping services increased by more than 30 percent, which indicates that the nation’s consumption upgrade is continuing.
As the consumption structure upgrade is driving domestic demand for high-quality goods, the trade dispute with the US will prompt more Chinese exporters to shift to the domestic market, and they will be welcome, an industry insider surnamed Du told the Global Times on Tuesday.