BEIJING/SHANGHAI:
Chinese energy sector worker Mandy Li likes to treat herself to a luxury brand handbag once in a while. But since her state-owned employer cut her wage by 10 per cent and the properties her family owns lost half their value, she only buys second-hand ones.
“I’m cutting down on large expenditures. The economy is definitely in a downturn,” said 28-year-old Li, adding her family’s wealth has shrunk due to the property crisis in China since 2021.
As deflationary pressures mount in the world’s second-largest economy, consumer behaviour is changing in ways that could lead to further downward pressure on prices, raising concerns that deflation could become entrenched, posing more headaches for China’s policymakers.
Data showed on Monday that consumer prices fell 0.1 per cent in May from a year earlier, with price wars raging in a number of sectors, from autos to e-commerce to coffee amid concerns about oversupply and sluggish household demand.
New businesses are seeking success by targeting penny-pinchers. But this trend is worrying economists who see price wars as ultimately unsustainable as losing firms may have to close and people may lose their jobs, fuelling further deflation.
Consumer price sensitivities have accelerated growth in the Chinese second-hand luxury market since the pandemic, with annual growth rates surpassing 20% in 2023, according to an industry report by Zhiyan Consulting from last year.
But that growth has also led to a spike in the volumes of such items, which is noticeable in the level of discounts on offer – up to 90 per cent.
“In the current economic environment we are seeing more existing luxury consumers shifting to the second-hand market,” said Lisa Zhang, an expert with Daxue Consulting, a market research and strategy firm focusing on China.
“The middle class – their salary has really decreased. The economy is the number one reason we’re seeing these trends.”