[Trapped in the Chinese Economy]② Empty Malls with Only Staff... "Phones Bought Every Year Haven't Been Replaced Even After 3 Years"

"This is a new product of the latest model. If you purchase now, you can receive discounts and accessory gifts."

Raffles City, a large shopping mall located in Dongzhimen, Beijing, China. Upon entering the row of electronics stores, the staff greet and quickly start sales. Even to the reporter who said they were just looking around, they persistently recommend using the latest foldable phone. When asked why there are so few customers in the store, they shrugged and said, "It's because it has been raining a lot lately and the weather is bad."

China's consumption slump is serious. Wallets, which were expected to open wide after the transition to With-Corona, remain tightly closed, and Chinese tourists who seemed ready to rush overseas with the reopening are still hesitant to travel. The frozen consumer sentiment during the three years of intensive quarantine measures is still palpable on the ground.

On the 3rd, Raffles City, a large shopping mall located in Dongzhimen, Beijing, China. Even considering it was a weekday afternoon, it was excessively quiet with very few people. Photo by Kim Hyunjung

Raffles City, visited on the 3rd, was excessively quiet even considering it was a weekday afternoon. Only the food and beverage stores had some crowd, while the luxury goods and electronics stores were staffed only by employees standing around. The heavy rain that had poured until the day before had stopped. When asked about best-selling items at the Xiaomi store, an employee pointed to fans and power banks. However, they also said, "Washing machines with dryer functions are convenient to use and popular," guiding the reporter to the high-end white goods section.

Recently in China, a consumption trend has emerged where people only open their wallets for 'small change' but are stingy about spending 'big money.' They still consume food, beverages, and clothing to some extent, but avoid buying household appliances, furniture, and cars that could burden the household. Zhu Baoliang, chief economist at the National New Infrastructure Center (SIC), explained, "The consumption patterns of young Chinese have changed significantly compared to the past. It used to be common to replace mobile phones every year, but recently, people do not even change them once every three years." He added, "While spending on clothing, which had been reduced over the past three years, continues, spending on durable goods such as home appliances, mobile phones, and laptops, which were purchased a lot during the COVID-19 situation, has decreased."

On the 3rd, an electronics store inside the large shopping mall Raffles City located in Dongzhimen, Beijing, China. Even considering it is a weekday afternoon, it is excessively quiet with hardly any people. Photo by Kim Hyunjung

In June, China's Consumer Price Index (CPI) rose by only 0% year-on-year, raising concerns about deflation (price decline), and retail sales increased by just 3.1%, signaling warning signs of an economic downturn.

A Korean running a shared space business in Tianjin city reported, "The number of students purchasing monthly memberships has sharply decreased." The economic situation, already depressed due to the withdrawal or relocation of large corporations including Samsung Electronics in the 2010s, has worsened recently. He said, "Simply comparing, customers who used to visit holding Starbucks cups now appear with cups from Mishebingqing (a Chinese ultra-low-cost beverage franchise)," adding, "This time, the recession seems likely to last a long time."

The tourism market is the same. People focus on domestic travel, which costs less, and rarely go abroad. In fact, the international terminal at Beijing Capital International Airport visited on the morning of the 5th was truly desolate. Departure hall seats were empty, and all duty-free shops were closed, not operating at all. It seemed that operations were temporarily suspended due to too few users.

On the 5th, Terminal 3 of Beijing Capital International Airport. Photo by Kim Hyunjung

According to the China Tourism Academy, Chinese people are expected to travel a total of 5.5 billion times this year, and the travel market revenue is projected to reach 5 trillion yuan (approximately 903.25 trillion won), about 80% of the pre-COVID-19 level. Zhang Yang, a researcher at the China Tourism Academy, explained, "The recovery of travel expenditure is somewhat conservative, but the number of trips during the Labor Day and Dragon Boat Festival holidays at the beginning of the year has already exceeded 2019." However, people did not travel far. As of the first half of the year, 50.9% of travelers leaving the mainland headed to Macau, followed by Hong Kong (26.7%), Thailand (3.3%), Japan (2.4%), and Taiwan (2.3%).

Especially, group tours, known as 'Youke,' have significantly decreased. According to data from the Chinese Ministry of Culture and Tourism, only 1.6% of overseas travelers in the first quarter of this year were group travelers. Before the pandemic, the proportion of group travelers was close to 30%.

The biggest cause of China's consumption slump is diagnosed as the failure of consumer sentiment, cooled by the zero-COVID policy, to find a thawing opportunity. In particular, the slowdown in disposable income growth is a major factor. According to Boston Consulting Group, one-third of China's 1.4 billion population is classified as middle class. The middle class is defined as having a monthly disposable income of 9,500 to 29,900 yuan. The disposable income growth rate of urban households in China in the first half of the year was only 4.4% year-on-year, lagging behind the GDP growth rate (5.5%). Chief economist Zhu diagnosed, "The reason for the consumption slump is that the income growth rate of the middle and low-income classes has slowed down too much since the pandemic."