Chinese youth draw strength from consumption the result of large job lossesin stark contrast to the spending habits of older people, which have remained stable since the pandemic, according to a prominent Chinese economist.
While China’s aging demographics could hold back the economy in the long term, older adults are increasingly being noted for their healthier finances and resilience, according to Gao Shanwen, chief economist at SDIC Securities, who has previously advised the country’s regulators and top officials.
“The younger the population of the province, the slower the consumption growth,” Gao he said with investors conference in Shenzhen on Tuesday, citing its analysis of regional data. In public remarks broadcast live on several platforms, he described China’s post-pandemic society as “full of lively old people, lifeless young people and desperate middle-aged people”.
The unsparing remarks quickly gained attention on Chinese social media, including Weibo, where videos and transcripts of Gao’s speech were trending. The candor was even more unusual at a time when local analysts are trying to tone down their language or even censor certain words such as “deflation” while officials are calling for a more positive narrative around the economy.
Less than four years ago, the ruling Communist Party’s mouthpiece People’s Daily celebrated the youth as a consumer force, saying they “became the main consumer group for many popular products”.
Retail sales have slowed since the spread of Covid-19 worsened in 2022, as consumer confidence took a hit from pandemic measures as well as China’s worst housing crisis in recent history. As the economy slowed, widespread wage cuts and layoffs also weighed on household budgets and reduced spending.
Although the government’s recent campaign to subsidize the purchase of cars and home appliances has led to a rebound in consumption, its growth is still far below the pre-pandemic level.
Before the pandemic, there wasn’t a strong correlation between the region’s consumption growth and its demographic patterns, according to Gao. The shift over the past few years reflects the fact that pension payments to retirees have remained stable, while employment prospects for young people have diminished, he said.
“At least for young people, their confidence in future incomes has dropped significantly, their spending has decreased, and their willingness to buy homes has also decreased,” he said. “But all these problems don’t exist for the older population.”
Youth unemployment remained high at 17.1% in October, more than triple the unemployment rate in urban areas nationwide.
There may be a total of 47 million people who have failed to find official jobs in cities over the past three years, even though the official unemployment rate has remained stable, Gao said, citing his analysis of trends in urban employment numbers before the pandemic. That’s equivalent to 10% of China’s urban workforce last year, based on Bloomberg calculations using official statistics.
These people may have returned to their hometowns in the countryside or turned to work, meaning they were not counted in the official statistics, he said. the rest independent analyses they also pointed to a weaker labor market than official data show.
In another bold statement, Gao estimated that China’s gross domestic product may have been overstated by 10 percentage points over the past three years, based on his analysis of discrepancies between data on economic growth and expansion in areas such as consumption, investment and the labor force.
A number of other economists did questioned accuracy of official data on GDP growth in 2022 and 2023.
