The Chinese retail sector is looking gloomy. With a decline of 0.6% in May compared to the same period of the previous year, excluding the exceptional years of 2020 and 2022 due to the Covid-19 pandemic, the sector recorded its worst performance since 1994, the year from which monthly statistics were established.
With the exception of communications equipment, all other categories of consumer durable goods saw significant declines, reports Caixin. The economic magazine specifies that sales of household appliances and audio equipment fell by 15.6% in one year, while those of automobiles fell by 16%. The jewelry sector was not spared either, with a reduction in sales of almost 9%. As for real estate, it remains at half mast. As a result, spending on construction and decoration materials fell by 13.6%.
“The strength of exports has supported the growth of industrial production, it is domestic consumption and investment which have both slowed considerably… observe Gelonghui. For the platform information intended for investors, this decline in consumption is not an isolated result, but the inevitable consequence of several factors.
Consumption weighed down by the real estate sector
The real estate industry first. The latter, according to the financial media, led to a significant reduction in household real estate assets. In 2021, the total value of the real estate market was 400,000 billion yuan, or approximately 51,500 billion euros. Since then, its value has fallen by more than 30%, the evaporation of 120,000 billion yuan in a few years, “the equivalent of China’s GDP in 2023†. The latter was then 129.400 billion yuan.
Difficulties in the job market are also a critical element. In China, 44% of the working population has a so-called “flexible” job. For the platform, in the absence of stable income, it is natural for residents to tighten their belts and reduce unnecessary spending. “The desire to consume has fallen to a historically low level†, continues Gelonghui, warning that“This is not a passing emotional fluctuation†.
Asked by Lianhe Zaobao, two Chinese economists abound: “The persistent decline in property prices has reduced household wealth and affected consumer confidence.â€
Qidian Caijing, blog specializing in economics and finance, also believes that the health of the real estate industry plays a vital role in this stagnation in Chinese consumption. In the past, the economy has been able to count on a very stable engine: household debt for property purchases. “The rise in real estate prices led to an increase in real estate loans, then an increase in the value of assets, and finally an increase in purchasing power… dissects the blog. However, this sector, which represented up to 30% of the Chinese economy at its peak, has been experiencing a deep crisis since the second half of 2021.
