Brighter Days Could Be Ahead for China’s Gloomy Consumers

(Bloomberg) -- Chinese consumer sentiment is at the lowest level in a decade -- but a rebound will come in the second half of the year, according to Morgan Stanley chief China economist Robin Xing.

As China lacks a credible official consumer confidence gauge, Xing uses a weighted average of five indicators to check the pulse: Official retail sales, consumer lending, car sales, air travel and restaurant catering. That barometer slid to the lowest since 2008 around the end of last year, he said in an interview on Wednesday.

Consumers were beset on all sides, he said. Last year, the government cracked down on risky peer-to-peer consumer lending, and the wealth effect from property values faded as the surge in property prices moderated. Crucially, since October "people started to worry more about the job market, and the prospects for wages and employment."

In previous slowdowns, policy makers banked on the growing spending power of China's massive population to cushion the blow, and the retail market is forecast to become the world's largest this year even amid a deepening deceleration. However, this time, the usually confident iPhone customers and SUV buyers have tightened their purse strings, sending shudders through multinational businesses around the world.

The silver lining is that "all those factors will improve later this year," according to Xing.

While top leaders have boosted government spending in infrastructure and upstream sectors, all those will take time to filter down to the downstream private sectors, according to Xing. Many risky lending platforms have been shut down already, local governments started easing property purchase restrictions, and employment prospects will be boosted by the government's stimulus package, he said.

To contact Bloomberg News staff for this story: Xiaoqing Pi in Beijing at xpi1@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger

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With assistance from Bloomberg