Retailers Say Chinese Consumer Spending Has Not Yet Recovered From COVID

China’s Consumer Pullback Test Brands’ Resilience

China’s consumer spending hasn’t seen the surge many expected after the lifting of COVID-19 restrictions.

In recent comments, the CEOs of eCommerce firms and Alibaba said the country’s consumer spending has not yet recovered from the downturn that was seen during the pandemic, CNBC reported Friday (March 10). CEO and Executive Director Lei Xu said Thursday (March 9) that the recovery so far is “imbalanced” and that consumer spending may not pick up until the second half of the year, according to the report.

Similarly, Alibaba CEO Daniel Zhang said last month that China’s consumer market has been tepid and that online sales remain weak, the report said.

Non-Chinese companies have made similar observations. Adidas CEO Bjorn Gulden said this week that he doesn’t expect the China market to recover this year, per the report.

The Chinese government said Sunday (March 5) that its economic growth target for the year is 5% — a goal CNBC characterized as conservative — and officials later said that they expect consumption to be a major driver of growth but that it is still restrained, according to the report.

Official data on China’s January and February retail sales is scheduled to be released Wednesday (March 15), the report said.

Companies in a variety of sectors have been anticipating a return of consumer spending both in China and abroad after the country’s pandemic-era travel restrictions were lifted.

For example, Starbucks and McDonald’s are opening new locations in China and banking on increased post-pandemic demand in the country.

“I remain more confident than ever that we are still only in the early chapters of our growth story in China,” Starbucks Interim CEO Howard Schultz said in early February.

Similarly, in the luxury goods space, LVMH Chairman and CEO Bernard Arnault said in late January that the reopening of China will bring new opportunities to luxury brands.

“We have every reason to be confident — indeed optimistic — on the Chinese market,” Arnault said at the time. “In Macau, where the Chinese can now travel to, the change is quite spectacular. The stores are full, and it’s really come back at a very strong pace.”

In the pre-pandemic year of 2018, Chinese consumers purchased about one-third of the world’s luxury goods.