2020
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Impact of COVID-19 on Consumer Spending – Q1 – China – May 2020
2020-08-27T16:02:10+01:00
OX990000
3695
123445
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Report
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“COVID-19 has disrupted China’s economic growth but the fundamentals of the economy remain solid. After all, China has a consumer market of 1.4 billion people and is among the first…

Impact of COVID-19 on Consumer Spending – Q1 – China – May 2020

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Report Summary

“COVID-19 has disrupted China’s economic growth but the fundamentals of the economy remain solid. After all, China has a consumer market of 1.4 billion people and is among the first few markets to emerge from the outbreak after decisive lockdown measures to contain the outbreak. Nevertheless consumer confidence has been shaken and there is growing uncertainty about the global economic climate after COVID-19. How quickly China’s economy can return to growth depends much on domestic consumer spending, which already accounts for 60% of its GDP growth by 2019. Therefore employment and CPI are the key macro indicators to monitor in the upcoming months.
Although key economic indicators and consumer confidence have shown signs of recovery since March, this quick recovery is largely driven by business activities resuming from a near standstill in February when the outbreak was at its peak. What’s more important in the long term is the recovery driven by the restoration of spending confidence. Our latest research in April suggests this will be slow and cautious. A few sectors, especially the essentials like in-home food, have benefited from COVID-19 as consumers have ‘brought the outside in’ during the outbreak, but many other sectors will be less fortunate and face different paths to recovery. While COVID-19 brings disruption, it is also a catalyst for change and will push businesses to innovate, improvise and adapt their business models in time of outbreak.”
– Jinyu Wang, Research Analyst, 30 April 2020

This report will look at the following areas:

  • How is COVID-19 impacting the economy?
  • How is COVID-19 impacting consumer spending?
  • Which sectors are holding up and which are struggling?

Table of Contents

  1. Overview

    • What you need to know
      • Key issues covered in this Report
        • Report scope
        • Executive Summary

            • Impact on the Economy
              • Impact on Consumer Spending
                • Figure 1: Confidence in improving future finances, 2015-2020
                • Figure 2: Summary of overall consumer spending in the short, medium and long term, April 2020
              • Key consumer segments being impacted
              • COVID-19 China Context

                  • Figure 3: Cumulative confirmed cases of COVID-19 in China, January to April 2020
                  • Figure 4: Status of returning to work, China, March and April 2020
              • State of the Economy – The Story So Far

                • Q1 GDP maintained 93% of the level last year, despite losing nearly two months’ productivity
                  • Figure 5: Quarterly growth of GDP in China, 2000-2020 Q1
                  • Figure 6: Monthly Purchasing Managers’ Index, China, 2001-March 2020
                • Consumers feel an income squeeze immediately after the outbreak
                  • Figure 7: Monthly surveyed urban unemployment rate, China, 2018-March 2020
                  • Figure 8: Consumer Price Index, China, 2014-March 2020
                  • Figure 9: Growth of per capita disposable income, China, 2014-2020 Q1
                • March marks the start of recovery but it is slow-paced and cautious
                  • Figure 10: Monthly growth of total retail sales of consumer goods and food service in China, 2000-March 2020
                  • Figure 11: Growth in total value of imports and exports, China, 2017-March 2020
              • 2020 Outlook

                • Fundamentals of the economy remain solid
                    • Figure 12: Contribution to GDP growth by key industries and drivers, China, 2000-2019
                  • IMF projects China will still grow in 2020 and rebound strongly in 2021
                    • Figure 13: IMF GDP growth projection of major economies for 2020 and 2021
                  • Stabilising employment will be the key to the economy in 2020
                    • Rebound of consumer confidence will be slow and cautious
                      • Figure 14: Concern over COVID-19 and its impact on lifestyle, March and April 2020
                      • Figure 15: Summary of overall consumer spending in the short, medium and long term, April 2020
                    • Speed of recovery will vary by sector
                      • Figure 16: Nominal growth by retail sales of consumer goods, 2019, January-March 2020
                    • Implications for business strategies
                      • Keep innovating and accelerate the pace
                        • Figure 17: Examples of brands communicating new offerings on their flagship stores on Tmall, April 2020
                      • Embrace e-commerce
                        • Figure 18: Example of luxury and fashion brands selling on WeChat, April 2020
                      • Struggling sectors need to improvise and adapt
                        • Figure 19: Example of foodservice and hotel adapting to challenging times, April 2020
                    • Change in Consumer Finances

                      • Substantial financial impact of COVID-19
                          • Figure 20: Changes in financial situation, December 2019 and March 2020 and April 2020
                        • Under-30s feel the financial hit more, with more polarised situations
                            • Figure 21: Changes in financial situation, by age, March 2020 and April 2020
                          • Self-employed and privately-owned businesses are more vulnerable
                              • Figure 22: Changes in financial situation, by employment, March 2020 and April 2020
                            • Lower tier cities recovering faster
                                • Figure 23: Changes in financial situation, by city tier, March 2020 and April 2020
                            • Confidence in Future Finances

                              • Obvious drop in confidence after the outbreak, but the majority are still positive about the near future
                                • Figure 24: Confidence in improving future finances, 2015-2020
                              • At least another four months for confidence to rebound to pre-COVID-19 level
                                • 40s and 50s are more certain about the future
                                  • Figure 25: Confidence in improving future finances, by age, March and April 2020
                                • Self-employed rely on demand to recover not just lifting of lockdowns
                                  • Figure 26: Confidence in improving future finances, by employment, March and April 2020
                                • More confidence in lower tier cities driven by state-owned employees and self-employed
                                  • Figure 27: Confidence in improving future finances, by city tier, March and April 2020
                              • Impact on Spending

                                • Immediate after the outbreak: bring the outside in
                                  • Figure 28: Changes in spending, 28 February to 6 March 2020
                                • Small indulgences will recover first
                                  • Figure 29: Changes in spending – spent more, December 2019, March and April 2020
                                • Big ticket items take longer as financial stress starts to weave in…
                                  • But long-term outlook is still optimistic once confidence is restored
                                      • Figure 30: Changes in spending – spent more, by change in finances, April 2020
                                  • Appendix – Methodology and Abbreviations

                                    • Methodology
                                      • Abbreviations

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