China’s No. 2 online retailer sees worrying signs that shoppers are reluctant to reopen their wallets, even as major cities emerge from harsh Covid lockdowns, suggesting it may take months for consumer spending to recover.
The months-long lockdown of cities like Shanghai has sparked a fundamental shift in how people spend their money, with a pullback in discretionary spending continuing even after the financial hub lockdown ended a few weeks ago, according to Xin Lijun. , Executive Director. from JD Retail.
The impact on cities affected by Covid is obviously greater and we are seeing that at the end of the outbreaks there is no quick recovery, which is very worrying for us said Xin, who runs a subsidiary of JD.com Inc. .
This year’s outbreak has completely cut off supply chains both internationally and domestically, and this has actually affected people’s livelihoods, which will likely take longer to recover,” he said in an interview with Bloomberg Television.
Retailers large and small have been hit for months by Beijing’s aggressive efforts to control virus outbreaks, with lockdowns of tens of millions of people and major cities crippling factory output and supply chains, as well as undermining consumer spending.
The slow recovery now means it will be even harder for China to achieve the full-year economic growth target of around 5.5 percent, especially if there are more large-scale Covid outbreaks.
Even with policymakers promising more support for private investment and the platform economy to mitigate the impacts of Covid, economists have continued to cut their growth forecasts this quarter and this year. Online retail sales are only likely to grow in the low single digits this year after expanding 12.5 percent last year.
Fitch economists said on Thursday, with the economy slowing, unemployment rising and expectations that the government will not give up its Covid Zero policy. this year all factors undermined that expansion. Total retail sales contracted for the third consecutive month in May, according to official data this week, as consumers cut spending and added record amounts to savings.
Online shoppers have fundamentally changed what they buy, according to Xin, with increasing demand for staples like rice and oil, as well as storage products like refrigerators, but spending less on things like entertainment and fashion.
In the past, there was more of this type of non-essential consumption, but this has decreased now that incomes have taken a hit and people have become more cautious and calculating about what they spend money on,” Xin said. “You can see this kind of structural change very clearly in consumer trends and the implications for future economic prospects.”
This was evident during the Shanghai lockdown, when stocks of food storage and storage products such as refrigerators and freezers ran out, and there was increased demand for work-from-home essentials such as printers and tablets, it said. Xin.