Consumer Confidence Slows in China as Spending Drops

Nielsen Report Says Chinese Still Have a Positive Outlook

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Rising food prices at stores like this Carrefour in Shanghai have shaken consumer confidence.
Rising food prices at stores like this Carrefour in Shanghai have shaken consumer confidence. Credit: Normandy Madden
BEIJING ( -- After five consecutive quarters of increased optimism, Chinese consumers' confidence levels dropped in the last quarter measured, according to the Chinese Consumer Confidence Report released in late November by the China Economic Monitoring & Analysis Centre (CEMAC) of the National Bureau of Statistics,and The Nielsen Company.

Chinese consumers are still positive about their country's economic development. A decline in f consumers' willingness to spend money is the main reason behind the pullback of this quarter's Chinese consumer confidence.

"Good progress of industrial transfers, industry upgrades, and urbanization are the key drivers behind this strong confidence we have seen from consumers in central areas of China," said Pan Jian Cheng, CEMAC's deputy director-general in Beijing.

Consumer confidence in China's tier one cities remained at a level of 101. In tier two and three cities, confidence levels increased by four and three points (to 101 and 104), respectively. In tier four cities, confidence fell by one point to 102. After consecutive increases for five quarters, rural consumers' confidence fell by 11 points to 106.

"Confidence cannot increase indefinitely. Natural disasters that have occurred in rural areas across China during the latest quarter coupled with an increase in consumer prices are two key factors affecting rural consumers' attitude in this latest quarter," said Mitch Barns, Nielsen's president, Greater China in Shanghai.

Consumers with a higher income are more confident. Middle and low income consumers' confidence fell by five and eight points, to 109 and 96 points, respectively. A key driver was an increase in prices, and a belief that prices, especially for food, will keep going up.  

Chinese consumers' biggest concern is still their income, followed by health and children's education.

Seventy-six percent of China's consumers expect prices to increase within the next 12 months, a 6% increase compared to the last quarter. Only 19% believe prices will remain unchanged and just 5% believe that prices will decrease. Consumers in rural areas and in tier one cities are the most concerned about price increases.

Although China's property market has started to show signs of cooling off, 62% of respondents expect property prices to increase in the next 12 months, particularly among consumers in rural areas and tier three and four cities. That suggests the government's tightening measures have had a more significant impact on consumers in upper-tier cites. Only 41% of Chinese consumers think now is a good time to buy property, an 11% decrease compared from the last quarter.

Rising concerns over price increases have not impacted consumers' positive attitude towards the coming year. Nearly seven out of ten (68%) Chinese believe their future job prospects are "good" or "excellent." Consumers in central China are the most confident (79%) in their future job prospects, followed by those in western China (65%), eastern China (63%), and northeast China (56%). Sixty-four percent of consumers expect that the state of their personal finances will be good or excellent within the next 12 months.

"As the government is taking effective steps to ensure domestic demand weighs more heavily in the GDP balance, the rise of China's middle class and the potential of the lower-tier cities in China deserve more attention for those who want to win in China," Mr. Barns said.

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