 "China's middle class remains cautious on property spending, reveals survey")
China’s middle-class households are exercising caution in their spending habits, particularly regarding property investments, reveals a recent study by the country’s Southwestern University of Finance and Economics in Chengdu, according to a report by South China Morning Post (SCMP).
Despite the government’s efforts to stimulate spending, the study indicated that families’ expectations for future expenditures are even lower than during the early stages of the Covid-19 pandemic.
The China Household Wealth Index Survey, conducted by the university’s Survey and Research Centre for China Household Finance, revealed a decline in the spending expectations index to 101.9 in the first quarter of this year, down from 103.0 in the fourth quarter of 2023. This index, where 100 marks the boundary between increased and decreased spending intentions, indicated a more conservative outlook, SCMP claimed.
These findings contrast with the government’s hopes of leveraging consumption to bolster the economy, especially amid challenges like external trade pressures and investment constraints due to debt burdens. Despite a 5.3 per cent year-on-year GDP growth in the first quarter, fuelled significantly by domestic consumption, discretionary spending on areas like travel and entertainment remains subdued, albeit showing slight improvement.
Reluctance towards real estate
The study highlighted a notable reluctance among households towards real estate investment, with fewer families purchasing new homes compared to previous quarters, SCMP noted. Only a small percentage intend to buy property in the near term, while a substantial portion prefer adopting a cautious ‘wait-and-see’ stance.
Moreover, the report indicated mixed sentiments regarding economic prospects, with a slight decrease in pessimism among respondents. However, concerns persist regarding job stability, especially among low-income groups, with household debt showing an overall increase, the report noted.
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Financial investment trends
Additionally, while there is enthusiasm for investing in precious metals, participation in the national private pension scheme has fallen short of policy expectations. Reasons cited include a lack of understanding of the policy, concerns about policy changes, and worries about withdrawal restrictions and limited tax incentives.
In light of these findings, the report suggested considering tax incentives to alleviate economic pressures on middle- and low-income families, emphasising the need for targeted policies to address their specific challenges, SCMP said.