Chinese Consumers Caucious, More Enclined To Save

Luxury Brands Slash Expectations As Chinese Consumers More Enclined To Save Than Ever

According to a poll by the People's Bank of China, the inclination of Chinese consumers to save money is at its greatest level in twenty years.

58.3% of survey participants stated they preferred to save their money than investing or spending it, representing an increase over the first quarter's 54.7%. The latest figure is the highest ever recorded since the start of data collection in 2002.

• Chinese consumers are worried about their future income, hereby driving their preference to save rather than to spend
• Luxury brands in China have slashed their expectations due to the weak consumer confidence
• According to an Oliver Wyman survey, luxury brands have reduced their expectation 3% year-over-year growth in China, from a 18% year-over-year growth previously

Local Chinese Banks Freezing Customers' Deposits

In April, four local Chinese banks froze deposits totaling millions of dollars while informing their clients that they were modernizing their internal systems. Depositors claim that since then, the banks have not released any communications on the subject.

• Since they lend to small and mid-sized businesses, China's numerous local banks have a large significance and are a strong indicator of the health of the Chinese economy
• According to Chinese media, the four banks are under investigation for fraud and frozen deposits might amount to $1.5 billion

Runs on small Chinese banks have been increasingly frequent in recent years, several banks have been charged with fraud or corruption.

• Experts fear that a much more serious financial crisis may be on the horizon, brought on by the aftermath of a real estate slump and mounting bad debts associated with the Covid-19 pandemic

China Starting To Feel Europe And U.S. Slowdown

After a robust recovery from the pandemic, Chinese manufacturers are beginning to see a decline in demand for consumer goods in developed economies. The decline is mainly caused by rising living expenses in the U.S. and Europe as well as importers waiting for future reductions in U.S.-China tariffs.

Demand for logistics necessary for deliveries is beginning to cool off since freight costs are finally starting to decline after rising to record levels during the pandemic

• Freight costs of 40-foot containers on significant routes tracked by the Drewry's Composite World Container Index, has decreased by more than 30% since September
• Companies now face ballooning inventories as consumer spending has started to slow, shopping habits have reverted to pre-pandemic norms and inflation eats into buying power

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Markus Winkler on Unsplash