China’s post-Covid economic recovery is slower than expected at a time when many consumers reportedly are suffering from pay cuts and growing child-raising and elderly care costs.
The year-on-year growth rate of total retail sales of consumer goods fell from 18.4% in April to 12.7% in May, the National Bureau of Statistics (NBS) said Thursday.
In the first five months of this year, China’s total retail sales of consumer goods grew 9.3% to 18.76 trillion yuan ($2.63 trillion) from a year ago. However, the increase was mainly due to a low base when many Chinese cities were locked down in March-May last year. The figure’s growth rate was actually 7.6% from 2021 to 2023, compared with 8% from 2019 to 2021.
While the official statistical updates don’t highlight the problem, the internet is buzzing with claims that workers already are suffering or soon will be suffering wholesale pay-slashing.
Commentators see pay-cuts trend
A Henan-based columnist surnamed Wu published an article entitled, “An era of salary deduction may be coming soon. Keep your jobs. Cash is king.”
Wu says in the article that many people are not willing to spend money as they are either having their pay cut or at risk of redundancy.
“As the unemployment rate among the young people continues to grow, many job seekers may ask for lower pay,” he says. “Most people who are already at work will face a salary cut this year.”
He says people tend to save more money these days as it is likely that China’s inflation will keep growing in the rest of this year.
A columnist at Lanjinger.com, a financial news website, writes in an article published Thursday that many employees of investment banks and brokerages have recently been told that they will receive reduced salaries and bonuses this year.
A Hunan-based writer says many medical staff have faced pay cuts this year as hospitals are receiving fewer patients but bearing higher operational costs. A Chinese vlogger says some IT workers are also experiencing 30-50% pay cuts.
Official statistics lack industry-by-industry breakdowns on pay and don’t quantify the pay cut situations described by netizens.
According to the NBS, per capita disposable income in urban areas rose 4% to 14,388 yuan in nominal terms in the first quarter of 2023 from a year ago, or up 2.7% in real terms. Disposable income in rural areas surged 6.1% to 6,131 yuan, or up 4.8% in real terms.
Media reports said last year that civil servants and teachers could not get their year-end bonuses. But still, the NBS said China’s per capita disposable income gained 5% year-on-year to 36,883 yuan in 2022 in nominal terms, or up 2.9% in real terms.
A Chinese writer notes that people’s disposable income is squeezed by rising child-raising and elderly care expenses. Citing research published by the YuWa Population Research, he says in order to bring up a child in China, a family has to spend about 627,000 yuan, a very big amount. Besides, he says, due to China’s aging population, there’s one elderly person for every pair of other adults (2.3 people to be more precise) to support financially.
How accurate are employment figures?
In its report Thursday the NBS said the jobless rate in urban areas remained unchanged at 5.2% in May from April. The unemployment rate of people aged between 16 and 24 was 20.8% while that of those aged between 25 and 59 was 4.1% last month.
Some commentators said the figures are seriously distorted as people are not considered as “jobless” if they work at least an hour per week, return to the rural areas or rely on financial support from parents.
They said some unemployed graduates have to pretend to have assured prospects in order to get their diplomas: Their schools require graduates to submit proof that they have job offers before school certificates are issued; some graduates ask friends and relatives to provide “offers” they can show to meet the requirement.
The NBS insisted that the official jobless figures have accurately reflected the job market situations.
“We have continuously improved and perfected our country’s labor force survey system since its establishment,” NBS spokesperson Fu Linghui said in a media briefing on Thursday. “The unemployment rates are scientific and standardized, in line with international standards, and can objectively reflect our country’s urban employment situation.”
Fu said anyone who works at least one hour per week, or who leaves a job temporarily due to holidays or suspension, is classified as “employed.” He said it is an international practice to exclude anyone who doesn’t have the intention to work from the labor force survey.
He said there are 96 million people aged between 16 and 24 in the country, but only 33 million of them have entered the labor market while the remaining are still studying. He said only about six million of these young people are still searching for jobs.
“Our country’s urban surveyed unemployment rate will not underestimate the nation’s jobless situation,” he said. “ From a historical perspective, the figure had objectively reflected changes in urban employment. For example, due to the epidemic in early 2020, the urban employment pressure had increased at that time.”
It is rare that the NBS feels the need to elaborate the methodology of its survey during the monthly media briefing.
Consumption patterns
Last December, the Chinese government announced that it would end all its Covid rules from January this year.
To avoid being confused by the low base in the January-May 2022 amid city lockdowns, one can compare the Jan-May figures in 2023 and 2021 to see the impact of the cancellation of Covid rules on the retail sales.
According to the NBS, catering revenue rose to 2 trillion yuan in the first five months of this year, up 22.6% from a year earlier but up only 12.2% from the same period of 2021.
In the first five months of this year, sales of jewelry were 13.2% above the 2021 level. Sales of cosmetics rose 4.2% while sales of telecommunication devices grew 2.4%. Sales of clothing, shoes, hats and textiles rose 1.4%.
Sales of automobiles were still down 2.8% while sales of electric appliances and audio and video equipment fell 5.9%. Sales of furniture dropped 15.4% while sales of building decoration materials slumped 18.4%.
In January, the China Banking and Insurance Regulatory Commission said in a meeting that supporting China’s economic recovery and boosting domestic consumption are its top-priority among all tasks in 2023. Banks are expected to provide more loans to consumers and cut rates to encourage people to spend more.
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