$1.80 dinners and budget clothes? The spread of frugality is hurting China’s economy

TAIPEI, Taiwan —  China’s 1.4 billion consumers once spent with enough abandon to help drive the global economy. Now one of the hottest topics on Chinese social media is how to save money.

“The main thing is just not to starve to death,” one video blogger advised in a post detailing how she subsisted on snack samples and free meals from temples and student canteens.

Another has gained a following in reviewing children’s meals that adults in Shanghai can eat on the cheap. “This is so economical,” she marveled over a $1.80 dinner. “They also included fried chicken.”

Other accounts tout $8 gym memberships and the merits of waiting for sales at fast-fashion clothing stores.

The tips appear to be working, as household savings have hit record highs. But experts say that’s bad news for the economy, because widespread scrimping is contributing to a dramatic slowdown in growth this year.

While the bigger factor is a worsening real estate downturn, which has eroded demand for commodities and diminished a crucial vehicle for household wealth and investment, economists say China’s economy is unlikely to recover without a rise in domestic spending.

Hou Muhan, a 28-year-old modeling agent living in Shanghai, used to borrow money from her parents every month to cover her bills.

But this year, after they started asking her to pay them back, she began tracking her expenses and became much stricter about spending at bars or trendy restaurants.

“I noticed every time I exceed my budget it’s usually because I go for drinks,” she said. “Socializing usually costs money. This is something hard to avoid in Shanghai.”

Now she mainly cooks at home. On the rare occasions when she orders in, she divides the rice into three portions, freezing two to eat with other meals at home.

Chinese consumers are going through a “consumption downgrade,” according to an analysis of mobile payment data by Shanghai Pulse Data Technology Co.

At the beginning of last year, a typical Chinese lunch customer spent between $1.40 and $1.70 on a meal. By the end of July, that range dropped to $1 to $1.30 as many diners stopped ordering their noodles with pork in favor of egg or vegetables.

As housing and stock prices have fallen, consumers in 25 out of 32 Chinese cities spent less than average in the first half of the year, according to the report.

Over the last few years, the housing downturn, record youth unemployment and layoffs in tech and other industries have compounded economic pessimism. A highly anticipated rebound in consumer spending after the pandemic never materialized.

Luxury brands are also falling out of favor in China, as shoppers have pulled back on big-ticket purchases. French conglomerate LVMH, an industry bellwether and the owner of the Louis Vuitton and Dior brands, reported a 16% slide in quarterly revenue in Asia excluding Japan last week, as its chief financial officer noted consumer confidence in China had slumped to an all-time low.

Without faith in their economic futures, consumers are unlikely to let go of the frugality they have adopted in recent years.

“Whenever there is uncertainty about the economy, households save more,” said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, a French investment bank. “Disposable income is not growing. People are losing purchasing power.”

China has relied heavily on infrastructure, manufacturing and exports to drive its economic growth over the last decade. But economists said that as those sectors have matured they have lost some of their power to fuel the economy.

In an interview with the state-run China Daily, Chen Wenling, chief economist for Beijing-based think tank China Center for International Economic Exchanges, said consumption probably would become an engine for faster economic growth in the long run than industrial investment or exports.

She called on the government to find ways to create more jobs and bolster household income.

It’s unclear what such efforts might entail. Over the last month, officials have announced a raft of incremental measures to lift the economy, including cutting interest rates and financial support for the property and stock markets.

But Ernan Cui, a consumer analyst at Gavekal Dragonomics, wrote in a September report that Chinese leaders are unlikely to roll out actions to directly stimulate consumer spending, such as distributing cash to households.

Cui said that disinclination is partly because high existing household savings would necessitate a cash infusion of hundreds of billions of dollars to have a notable effect. Chinese leaders are also reluctant to exacerbate income inequality or discourage people from looking for work, she said.

Amora Liu said she worked hard to save at least $225 of the $1,000 she earned each month from her job as a legal consultant at a courier company.

“If I spend it all, then I really have no sense of security,” said Liu, 25, who posts video diaries of her budgeting on social media.

In May, she moved from the city center to the suburbs more than an hour away, cutting her rent in half. She also started cooking for herself every day instead of going to restaurants.

She managed to save up about $4,200 before she took an even more extreme step: quitting her job and moving back in with her parents in Changsha, the capital of Hunan province.

She has used her savings to travel a little, but living at home has cut her consumption and spending dramatically.

Her video blog details a new budget that would make the economists cringe.

Rent? Free.

Lunch and dinner? Free.

Times special correspondent Xin-yun Wu in Taipei contributed to this report.