Sluggish household income growth is ‘holding back’ Chinese consumer spending - Barclays

CNBC reports that according to Jian Chang, chief China economist at Barclays Asia Pacific, consumer spending in China has largely lagged the country’s overall economic recovery from the pandemic and that sluggishness stems from slower household income growth.

Data showed China’s retail sales once again missed analyst expectations. Official data reported retail sales rose 12.4% in May from a year ago, less than the 13.6% increase forecast by analysts.

Barclays economists said they do not see growth in China’s consumption and services returning to pre-Covid levels this year.

“A fundamental issue, I think, that has been holding back the Chinese consumer spending is really the … slower household income growth, and particularly for lower income group,” Chang told.

“To improve household consumption share in the GDP you really need to improve household income share in the GDP,” Chang said.

“That means you really need to improve income distribution … which we know that is quite difficult, especially after the global financial crisis and after the pandemic. We really see globally, you know, there is the widening of income gap and the widening of wealth gap,” she said.