Chinese youth are losing strength from consumption the result of profound job lossa marked contrast to the spending habits of the elderly, which have remained stable since the pandemic, according to a prominent Chinese economist.
According to Gao Shanwen, chief economist at SDIC Securities, who has previously advised the country’s regulators and senior officials, while China’s aging demographics may hold back the economy in the long term, the elderly are increasingly distinguished by their finances and resilience.
“The younger the population of the province, the slower the growth in consumption,” Gao said said to the investor conference in Shenzhen on Tuesday, citing its analysis of regional data. In public remarks broadcast live on multiple platforms, he described China’s post-pandemic society as “full of bright old people, lifeless young people and middle-aged people in despair.”
The blunt remarks quickly caught the attention of Chinese social media, including Weibo, where videos and transcripts of Gao’s speech are popular. 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” as officials call for a more positive narrative around the economy.
Less than four years ago, the People’s Daily, the mouthpiece of the ruling Communist Party, called young people a paying force, saying they were “becoming the core consumer group of many popular products.”
Retail sales have been sluggish since the spread of Covid-19 worsened in 2022, with consumer confidence hit by pandemic measures as well as China’s worst real estate crisis in recent history. As the economy slowed, widespread wage cuts and layoffs also weighed on household budgets and cut spending.
Although the recent government campaign to subsidize the purchase of cars and household appliances has led to a rebound in consumption, its growth is still much lower than the pre-pandemic level.
According to Gao, before the pandemic, there was no strong correlation between the region’s consumption growth and its demographic patterns. The shifts in recent years reflect the fact that pension benefits for retirees have remained stable, while employment prospects for young people have dimmed, he said.
“At least for young people, their confidence in future income has decreased significantly, their spending activity has been limited, and their willingness to buy a home has also been limited,” he said. “But all these problems don’t exist for the elderly.”
Youth unemployment remained high at 17.1% in October, more than triple the national urban unemployment rate.
A total of 47 million people may have been unable to find formal jobs in cities over the past three years, even as the official unemployment rate remained stable, Gao said, citing his analysis of pre-pandemic trends in urban employment figures. That’s equivalent to 10% of China’s urban workforce last year, according to Bloomberg calculations using official statistics.
Those people may have returned to their hometowns in rural areas or turned to gigs, meaning they are not counted in official statistics, he said. Other independent analyses also pointed to a weaker labor market than indicated in official data.
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 in doubt accuracy of official data on GDP growth in 2022 and 2023.
