Recent development fosters frugality among China's younger generation.
younger Chinese individuals are more cautious with their expenditures. The era of lavish purchases utilizing credit has concluded - thrift is now the rallying cry of Generation Z. They barely make ends meet on merely 40 euros a month.
Instead of indulging in luxury purchases and dining out, they opt for discounts rather than delicacies. The post-pandemic frenzy of unrestrained spending, referred to as "revenge spending," appears to have waned, at least in China.
However, a new trend is gaining traction among Chinese youth: "revenge saving," or "revenge frugality." These individuals are doing their best to save every penny they can.
The Chinese economy, the world's second-largest, is grappling with numerous challenges. In the second quarter, GDP growth dropped to 4.7%, its lowest rate since early 2023. In the first three months of the year, the GDP grew by 5.3%. According to Max Zenglein, chief economist at the Mercator Institute for China Studies, "The government had hoped that normality would return after China ended its stringent measures. But that hasn't happened yet."
Sky-high youth unemployment
China is faced with a real estate crisis, weak consumer spending, and staggeringly high youth unemployment. In August, 18.8% of individuals aged 16 to 24 were unemployed. Although this was not as high as in 2021, when youth unemployment reached a record 21.3% in June, it remained significantly higher than in July and was at its highest level since the beginning of the year. It's likely that the true number of unemployed individuals is far higher, as Chinese authorities only count urban, young unemployed individuals. Students are no longer considered unemployed.
Unemployment is particularly high among university, vocational, and technical college graduates: 70% of unemployed youth in 2022 were university graduates. Two decades ago, the figure was only 9%.
The main cause is the influx of many more university graduates into the job market during the traditional graduation season than there are job openings available, according to the spokesperson for the National Bureau of Statistics. There's ongoing employment pressure, with both job seekers and employers encountering difficulties.
Xi strives to create more jobs
Approximately 12 million students graduated this summer in China - a record number. However, their degree does not guarantee a good job. They flood the job market, but many cannot find employment despite their education. Only 50.1% of them had job offers in the spring.
The weak economy is one reason. Another reason is that many Chinese companies find the qualifications of job applicants unsuitable. For instance, there's an increasing number of humanities graduates, but there's a need for specialists in other fields.
Youth unemployment is a pressing issue, causing President Xi Jinping to declare it the "highest priority." In a speech to the Political Bureau of the Communist Party of China in May, Xi specifically mentioned university graduates, stating that "more jobs need to be created for them to apply what they have learned and are skilled at."
University graduates deliver groceries
Those who find employment struggle to make ends meet. In major cities like Shanghai and Beijing, recent graduates with university degrees earn an average of 670 euros per month. Most of that goes towards rent. On average, a person in Shanghai spends around 360 euros per month on rent, according to data from Chinese investment bank Guotai Junan Securities from 2019. Those who cannot afford it still live with their parents.
Many graduates must settle for less qualified jobs and lower wages. A young man who graduated this year told the China Observer that he has sent out hundreds of job applications and attended numerous interviews - all to no avail. Today, he delivers groceries. "I thought a degree meant a diploma, but it felt like a certificate of unemployment. Now I'm desperately searching for a job. And my parents keep pushing me to find work. I chose grocery delivery to temporarily relieve my stress."
Unemployment is rampant in China, wages are low - the future is uncertain. The hope for an economic recovery has faded. "It's impossible to ignore the pessimism of the younger generation. The feeling that everything they do doesn't matter while their country ages, inequality grows, and economic forecasts are bleak," says sociologist Yun Zhou from the University of Michigan to ntv.
Economical Eating Habits
Therefore, it's no surprise that saving is a popular trend on Chinese social networks. Young Chinese individuals compete to outdo one another in their frugality. They cook at home instead of ordering takeout. In groups, they exchange thrift tips.
A 26-year-old user posts videos demonstrating how to survive on around one euro per day. She cooks instant noodles or raw vegetables. Thus, she manages to live on around 40 euros a month.
Others share restaurant bills with their friends instead of paying independently, choose cheaper local brands over well-known ones, and use second-hand books instead of new ones.
Communal Canteens and Price Comparisons
More and more young people are discovering communal canteens. For roughly 2.50 euros, they can enjoy a complete, fresh meal. Over the past few years, many cities have opened such canteens with government support, originally for the elderly. But now, young people are also visiting these "senior canteens."
And when they shop, young Chinese individuals adopt shopping habits more characteristic of retirees: they use apps for discount coupons, compare prices using social media, and pay with cash rather than their smartphones.
"Chinese youth are spending less, a trend that began in 2020 post-Covid-19, as stated by economics professor He-Ling Shi from Monash University to CNA. The primary reason? Less income,"
Decline in Sales for High-End Brands in China
The fact that Chinese consumers are opting for savings over expenditures is also evident to luxury brands: July sales for Hugo Boss, Burberry, Richemont, and Swatch saw a significant dip.
As per economist He-Ling Shi, wealthier individuals in China traditionally flaunt their wealth through expensive cars and accessories. However, the younger generation isn't as fortunate. Consequently, they're likely to alter their consumption habits due to financial constraints.
In the 2010s, it was quite the opposite: youngsters often overspent, even resorting to loans to purchase Gucci handbags or iPhones, as revealed by the CEO of the China Market Research Group, Shaun Rein, to CNBC.
Saving for Retirement and Emergencies
Overall, Chinese people are saving more. Data from the Chinese Central Bank indicates that by June, private households had amassed an unprecedented 18.6 trillion euros. Gold is also a popular investment, driving up gold prices.
"We've noticed an increase in younger households aiming to maintain liquid funds. In other words, they're preferring to hold cash instead of spend," says Wang Dan, Chief Economist of Hang Seng Bank, to CNA. Over the past 45 years of reform and opening up, people tended to spend more. However, after the COVID-19 crisis, uncertainty has grown. "The economic outlook isn't looking up."
Saving not only builds financial reserves but also offers a feeling of security in preparation for unforeseen circumstances. For example, whether young people will receive a pension is uncertain. Given China's rapid aging, by 2035, there will be over 400 million individuals aged 60 or above - more than the USA's population. This poses a significant challenge for the underfunded pension system. Within the next decade, the state pension funds are predicted to exhaust, according to the Chinese Academy of Social Sciences. This could be why numerous young people are currently focusing on saving as much money as they can for a rainy day.
The Chinese economy, struggling with challenges such as low GDP growth and high youth unemployment, is prompting individuals to adopt economical habits. Young Chinese individuals are saving more due to uncertainty and financial constraints, which is reflected in the decline in sales for high-end brands in the country.
