French media RFI recently published an article analyzing the situation of sluggish consumption in China and its causes, citing an article from Le Monde, also a French media outlet. According to the same article, at the root of the problem is the "inability to trust society" due to various underlying factors.

In China, many people have become "cautious about consumption." In April, the year-on-year growth of total retail sales of consumer goods was 0.2%. Furthermore, while consumption accounts for close to 70% of GDP in the United States, it remains at only 40% in China. The weakness of consumption in China is already affecting diplomatic and trade relations. The European Union (EU) and others are constantly criticizing China's import deficit. The EU's trade deficit with China is approximately 1 billion euros (about 180 billion yen) "per day."

Firstly, as a cause of the consumption slump in China, we can cite the real estate crisis that began in 2020. In China, for the 20 years leading up to that, housing prices continued to rise with rapid urbanization. People believed real estate was the safest investment and invested about 70% of household wealth in it. In 2020, Chinese authorities, with the aim of preventing a real estate bubble, began limiting the debt size of developers. As a result, large real estate companies like Evergrande successively fell into crisis. After that, housing prices in major cities such as Beijing, Shanghai, and Shenzhen cumulatively fell by nearly 40%, and the asset values of a large number of households decreased. According to estimates by Barclays Bank, the amount of assets lost by Chinese residents due to the fall in real estate prices exceeded 15 trillion euros (about 2.8 trillion yen).

The shrinking of wealth clearly changed residents' consumption psychology. Many people began reducing travel, dining out, and unnecessary expenses, and started depositing more of their income into banks.

Industrial overcapacity is also considered one cause of the consumption slump among Chinese people. In many industries in China, supply far exceeded demand, leading to fierce price competition. As corporate profits were squeezed, wage increases stagnated and even began to decline. At the same time, the persistently high youth unemployment rate put a brake on consumption among the younger generation. The parent generation had to provide financial support to their children and began to curb their spending.

There are also observations that behind the Chinese people's caution toward consumption lies the relative vulnerability of China's social security system. While China has achieved well-developed public transportation, including a world-leading high-speed rail network, and high-level education and medical facilities, it is a "developing country in terms of development" when it comes to unemployment insurance, medical coverage, and pensions. Considering their future, people are not in a situation where they can enjoy consumer life with peace of mind.

The article introduced the case of a 52-year-old man working as a ride-sharing driver in Beijing. The man used to run a home appliance repair shop, but with fewer customers, he was forced to switch careers to a ride-sharing driver. However, competition is similarly fierce in the ride-sharing industry. To maintain their monthly savings, the man and his wife not only reduced dining out but also moved their residence to a suburb far from the city center. The man explained that the slump in the real estate industry led to mass unemployment among construction workers, and many of them entered the ride-sharing industry.

In China, the middle class is also reducing consumption. According to a 46-year-old woman working as a manager at an EU-affiliated powdered milk manufacturer, she is worried that the development of artificial intelligence (AI) threatens the jobs of employees aged 40 and over, so she puts about 40% of her salary into savings rather than investment or consumption. The woman stopped buying luxury goods and imported products and began choosing affordable domestic brands of decent quality. The woman explained, "The most important thing has become a sense of security. It's not about consumption for show."

Le Monde pointed out that "the Chinese government is attempting reforms." Measures recently introduced include the expansion of migrant workers' rights to enjoy public services at their workplaces, the improvement of working conditions for new employment groups such as delivery drivers, and the extension of spring and autumn holidays to stimulate travel consumption. However, even these policies find it difficult to rapidly change the "savings-oriented mindset" that has taken root among people.

Ultimately, China's consumption deficit is not just an economic problem but is strongly characterized as a "problem of trust across society." With real estate prices no longer continuously rising, employment prospects full of uncertainty, and social security still insufficient, the tendency for residents to prioritize "preemptive preparation" is naturally strengthening. (Translation and editing/Kisaragi Hayato)