Why does China want its young people to spend more money but they resist?

Companies pay him money to promote their products to his 97,000 followers on the Xiaohongshu platform.

“I hope more people understand the risks of consuming for the sake of saving. This will reduce their stress and give them peace of mind,” he commented.

Others focus on eating on a budget.

The 29-year-old, known as the “Little Floating Grass” in Beijing, posts videos in which he prepares simple dishes, claiming he can eat twice as much for just over $1.

He tells his followers: “I am an ordinary rural citizen. I have no higher education or influential connections, so I have to work hard to achieve a better life.”

He works for an online sales company and claims that his very modest lifestyle has allowed him to save more than $180,000 in six years.

Some people asked him on the networks if he hopes his wife and children will live the same way and what his ultimate goal is. His answer is “I don’t know.”

China has gained a reputation as an unstoppable economy, capable of overcoming the epidemic crisis and the trade war launched by US President Donald Trump.

But analysts say it will face major challenges in the long term if it does not boost domestic spending.

While the United States faces the problem of overborrowing on its credit cards, the challenge in China is the opposite. People now tend to save rather than spend, and this tendency intensifies when it is perceived that difficult times lie ahead.

The Chinese government has promised for years to increase household consumption, but it still represents only about 39% of GDP, compared to about 60% in most developed countries.

Part of the problem is that young people today are more pessimistic than they were in the 1990s and early 2000s.

A young woman from central Beijing told the BBC: “Right now, making money is more important to me. I need to diversify my sources of income and reduce my expenses.”

He adds that, as with many other young people, his salary has decreased.

“I changed my job, but I don’t earn the same income. Moreover, I don’t know how long I will be able to keep this new job. A bad economic situation like this discourages people because we don’t earn much. Finding a job, in the beginning, is not easy either,” he laments.

This level of youth unemployment, in addition to generating insecurity, makes it easier for companies experiencing economic hardship to cut salaries, as workers are forced to choose between accepting a lower salary or joining a highly competitive labor market.

Another young man, also in his twenties, comments that there are low-skilled jobs available, but it is difficult to find a decent job in his area of ​​expertise.

“Some of my friends are unemployed, still living with their parents and looking for work,” he says.

“They studied all kinds of careers at university, from financial services to sales,” he says. “The economy is a bit weak at the moment. I hope it gets better so we can all have a better life.”

What are the chances of this happening soon? “I’m not very optimistic,” he admits.

One of the big concerns for new Chinese graduates is that the country is going through a difficult transition from being a huge producer of cheap goods to a high-tech economy. Many of these new industries do not require that many workers.

Economist George Magnus, research associate at the Center for China Studies at Oxford University, follows this phenomenon closely.

He cites figures from two major recruitment companies in Beijing that show a high proportion of university graduates, including master’s degrees, working as delivery drivers.

“This reflects a mismatch between the qualifications people obtain after graduating from higher education and the current demand for labour,” he says.

“Of course, striving to become a leader in robotics and artificial intelligence is not helping, at least for now, and that is hindering job opportunities. Technology is not really a labor-intensive sector,” he adds.

Helena Lofgren, who studies China’s consumption patterns for the Swedish Institute of International Affairs, believes its economy is overly dependent on investing large sums of money in strategic sectors and selling products abroad at a time of great geopolitical uncertainty.

“People are saving more than they consume, and consumption should represent a larger proportion of the Chinese economy than it currently does,” he says.

He explains that China “has a very export- and investment-oriented economy, and what we see now is that these sectors are too large for the economy to remain healthy.”

It all comes down to economic imbalance. For example, if China suddenly loses a significant amount of export revenue, does it have the tools to counteract this by financially empowering its vast population?

Some observers questioned the Communist Party’s seriousness about increasing domestic consumption.

In recent decades, the country has flourished thanks to the investment and export model, but this approach now faces a major challenge: deflation. Potential consumers usually wait for prices to fall.

If a young couple wants to buy a new sofa set, for example, they may want to wait until they get a better deal.

The longer these companies – and many others – postpone large purchases, the more likely companies are to cut prices, which will cause people to wait longer to get a better deal.

Getting cheaper products may seem like a good idea, but deflation can force businesses to close and slow overall growth.

This can be countered by encouraging optimism among consumers in their 20s and 30s, through measures such as improving the social safety net or increasing the minimum wage.

Some attempts have been made to offer incentives to replace old cars, appliances and other items, but they have not significantly boosted consumption.

Influencer Zhang emphasizes that wise spending is deeply rooted in her country’s culture.

“My grandfather’s generation was very frugal, very frugal. This is part of the Chinese tradition. For the Chinese, frugality is innate,” he says.

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