Despite official figures showing inflation running at a much slower pace than in the U.S. and other nations, Chinese consumers claim they are feeling the squeeze of rising prices more and more.
This is supported by polls that the consulting company Oliver Wyman performed and made public this month.
According to the report, 83% of more than 900 respondents indicated they felt the effects of inflation in July, up from 69% in November 2021.
With a 2.7% increase year-over-year in July, China’s consumer price index reached a two-year high, mostly as a result of a rise in hog prices. In August, the index eased to display a 2.5% increase over the prior year.
That is considerably less than the U.S., which just now recorded a rise in consumer prices of 8.3% over the same month last year. A decrease in petrol prices is compensated by rising housing and food expenditures.
In contrast, 92% of respondents to Oliver Wyman’s July survey of more than 1,200 Americans, an increase from 79% in November, said they felt the impact of inflation on daily living.
Even while the proportion of affected respondents increased by 1 percentage point more in China than the U.S., this still indicates that inflation has a greater impact in the U.S. than in China.
It’s crucial to keep in mind that the surveys represent sentiment and aren’t necessarily a substitute for the consumer price index, according to Ben Simpfendorfer, a partner at Oliver Wyman with offices in Hong Kong. He issued a warning, noting that reactions in China were probably affected not only by actual price rises but also by the general atmosphere of slowing growth.
“If the GDP background is weaker, it would take a smaller increase in prices to trigger concerns among people,” he said.
More than half of respondents in China claimed that, in preparation for a future recession, they had cut back on their outings for food and entertainment and, where possible, switched to less expensive products and services.
Concerns about jobs and rent
Around the world, worries about an economic recession have increased. The country’s gross domestic product is on course to decline significantly from last year, despite the International Monetary Fund’s statement in July that it still expects China to be one of the world’s largest economies with one of the fastest rates of growth this year.
Compared to 13% of Americans, nearly one-third of respondents in China expressed concern about the security of their employment due to inflation. According to the company, the study mostly included residents of China’s largest cities.
About 20% of survey participants were anxious about how inflation would affect their capacity to pay their rent or mortgage, and about 40% were concerned about how they would be able to buy groceries and other necessities.
According to an official study conducted in July, the unemployment rate for young people in China between the ages of 16 and 24 has increased to about 20%, compared to 5.4% for working adults in urban areas.
Postponing certain purchases
According to the Oliver Wyman poll, gas costs were perceived by Chinese consumers as having increased the most noticeably in the year through July, followed by appliances and house improvements.
The report indicated that when asked what purchase they could postpone due to inflationary pressures, respondents most frequently mentioned autos, followed by leisure vacation.
The persistent low consumer demand in China is made worse by potential buying delays.
In a research released on September 9 by Macquarie, the country’s senior China economist Larry Hu stated that China’s “zero-Covid policy is a huge deflationary force, which promotes output but stifles demand.” According to him, real estate problems are “another important deflationary influence.”
Hu emphasised that China’s consumer price index only increased by 0.8% in August, excluding food and energy. The message to China’s policymakers is very clear: at this point, deflation rather than inflation is China’s biggest risk.
Chinese respondents to Oliver Wyman’s survey expressed a fair amount of optimism about the future of their country’s economy.
More over half of respondents said they believed the Chinese government would be able to control inflation in the upcoming months, while 23% disagreed.
The research noted that compared with nearly half of American respondents who said they didn’t believe the government could stop inflation in the following six to eight months.