China’s big consumer market isn’t rebounding to pre-pandemic levels just yet?

For the year ahead, Bain partner Derek Deng said China’s consumer spending likely wouldn’t even return to 2021 levels due to macroeconomic developments.

China’s retail sales were down slightly for 2022 as of November, official data showed. Consumption has lagged overall economic growth since the pandemic began nearly three years ago.

For the year ahead, Bain partner Derek Deng kept a lid on expectations. “The hope is we at least get back to the first quarter of 2022 level,” he said, noting that was just before the Shanghai lockdown.

Retail sales for the first three months of 2022 were up by about 3.3% from a year ago, but had slowed to a decline of 0.7% for the first half of the year.

A return to 2021 — when retail sales rebounded by 12.5%— would be an optimistic scenario, Deng said. “I don’t think people are seeing that as sort of the base case, mostly because the macro factors are actually less favorable compared to 2021.”

The bulk of Chinese household wealth is tied up in real estate, a one-time hot market that’s slumped in the last year. Mainland Chinese stock markets dropped in 2022 for the first time in four years. Exports, a driver of China’s growth, have started to decline in the last few months as global demand wanes.

Deng also noted fears of a second Covid wave, the highly contagious XBB omicron subvariant coming in from overseas and geopolitical uncertainties.

“I think that has also impact on people’s perceptions on their disposable income, or whether they need to save to weather all those uncertainties,” he said.

Chinese consumers’ penchant to save reached record highs last year, according to People’s Bank of China surveys.