Why China wants young people to spend more money, but they resist

Companies pay him to promote their products to his 97,000 followers on the Xiaohongshu platform.

“I wish more people understood the pitfalls of spending to save. Doing so would reduce stress and give them peace of mind,” he commented.

Some people focus on eating on a budget.

The 29-year-old, known as Beijing’s Little Floating Grass, posts videos of himself making simple dishes and claims he can get two meals for just over $1.

“I am an ordinary country person. I have no higher education or powerful connections, so I have to work hard to achieve a better life,” he tells his followers.

He works for an online retail company and claims to have saved over US$180,000 in six years thanks to a very frugal lifestyle.

Through their networks, some ask if they want their future wives and children to live the same way, and what their ultimate goals are. His answer is “I don’t know.”

China has earned a reputation as an unstoppable economy that can overcome the pandemic crisis and US President Donald Trump’s trade war.

But analysts say the country will face major challenges in the long term if domestic spending does not increase.

While the problem in the United States is that people borrow too much on credit cards, the problem in China is the opposite. People are now more likely to save than they are to spend, and this tendency is exacerbated by the perception that difficult times are ahead.

Although the Chinese government has promised to increase household consumption for years, household consumption still accounts for only about 39% of gross domestic product (GDP), compared with 60% in most developed countries.

Part of the problem is that young people today are more pessimistic than they were in the 1990s and early 2000s.

“Earning money is more important to me now. I need to diversify my income sources and reduce my expenses,” a young woman from central Beijing told the BBC.

Like many other young people, his salary has also been reduced, he added.

“I changed jobs, but the income is not the same. Moreover, I don’t know how long I can continue with this new job. In such a bad economic situation, people lose motivation because they don’t have much income. It’s not easy to find a job in the first place,” he laments.

In addition to creating insecurity, this level of youth unemployment also makes it easier for companies in financial difficulty to cut salaries, as workers are forced to choose between accepting lower salaries and participating in a highly competitive labor market.

Another young man, also in his 20s, commented that while there are low-skill jobs available, it is difficult to find a decent job in your field.

“Some of my friends are unemployed, still living with their parents and looking for work,” he says.

“They studied all kinds of trades in college, from financial services to sales. The economy is in a bit of a downturn right now. I hope it improves so we can all live better lives,” he says.

And what are the chances that this will happen soon? “I’m not very optimistic,” he admits.

A big concern for new graduates in China is that the country is undergoing a difficult transition from a mass producer of cheap goods to a high-tech economy. And many of these new industries don’t require as many workers.

Economist George Magnus, a research fellow at Oxford University’s Center for China Studies, is watching this phenomenon closely.

He cited figures from two major Beijing recruitment agencies that show a high percentage of university graduates, including those with master’s degrees, are employed as delivery drivers.

“This reflects the mismatch between the qualifications people have to graduate from higher education and existing labor demand,” he says.

He added: “Of course, trying to be a leader in robotics and AI is not going to help, at least for now, because this will stifle job opportunities. Technology is not really a labor-intensive field.”

Helena Lofgren, who studies Chinese consumption patterns at the Swedish Institute of International Studies, believes that at a time of great geopolitical uncertainty, China’s economy is too reliant on large investments in strategic sectors and on selling products overseas.

“People are saving more than they are spending, and consumption should become a larger share of China’s economy than it is now,” he said.

He explains that China “has a very export-oriented, investment-oriented economy, and what we’re seeing now is that these sectors are too large to keep the economy healthy.”

It all comes down to economic imbalance. For example, if China were to suddenly lose significant export revenues, would it have the means to counter this by economically empowering its huge population?

Some observers question the Communist Party’s seriousness about expanding domestic consumption.

In recent decades, the country has prospered thanks to its investment and export model, but this approach now faces the major challenge of deflation. Potential consumers usually wait for prices to drop.

For example, if a young couple wants to buy a new sofa set, they may want to wait until they get a better deal.

The longer they and many others put off big purchases, the more likely it is that companies will lower prices and people will wait even longer for a better deal.

While acquiring cheaper products may seem like a good idea, deflation can force businesses to close and slow overall growth.

This could be countered by encouraging optimism among consumers in their 20s and 30s, with measures such as improving social safety nets and raising the minimum wage.

Some attempts to offer incentives to replace old cars, appliances and other items have failed to significantly boost consumption.

Influencer Chan asserts that wise spending is deeply ingrained in the country’s culture.

“My grandfather’s generation was very frugal, very frugal. This is part of Chinese tradition. For Chinese people, being frugal is innate,” he says.

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