Chinese consumers fear splurging after COVID restrictions fall

SHANGHAI, Dec 12 (Reuters) – The China-weary public and businesses have welcomed the relaxation of strict “zero-COVID” measures, but Jorry Fan, who lives in the eastern city of Suzhou, said it prompted her to abandon any plans for a dinner party. during weeks.

The 44-year-old mother-of-two aims to avoid indoor dining or crowded places, opting for food deliveries instead, as she fears she or her family could catch COVID-19 after China has abandoned testing as a prerequisite for many activities.

“I’m very happy because previously I had to do a nucleic acid test almost every day, so it’s more convenient,” she said. “On the other hand, we don’t know who is safe, we don’t know who has the coronavirus. So we will be more careful.”

Consumers such as Fan show why analysts are not expecting a quick and broad rebound in spending in the world’s second-largest economy, as the cheer that greeted the abrupt relaxations was tempered by uncertainty for consumers and businesses. .

In theory, the outlook has improved for fast food players such as McDonald’s Corp (MCD.N), Starbucks Corp (SBUX.O), Yum China (9987.HK) and luxury companies like LVMH (LVMH. PA), after measures such as while shutdowns have withered sales.

Yet the relaxations are set to usher in a wave of infections that experts say could affect 60% of a population of 1.4 billion, whose fear has driven many off the streets while threatening to disrupt venues. labor and supply chains.

Spending is also expected to remain held back by lingering concerns about job security and a slowing economy.

Some economists have downgraded China’s growth forecast for early next year, which is expected to continue this year’s dismal growth figures that rank among the worst in the past half-century.

“Moving from isolation facility quarantine to home quarantine will not increase retail sales significantly,” said Iris Pang, chief economist for Greater China at ING.

The easing also happens differently in different places, with some retaining the brakes dropped by others.

In the mall in Shanghai, for example, people haven’t needed a negative COVID test to enter restaurants since Friday, but the rule still applies to those in Beijing.

Despite some reports from analytics firms of jumps in domestic flight and movie ticket bookings, the moves are starting from a low base and building a picture that clashes with scenes of empty subway seats during rush hour in big cities like Beijing and Shanghai.

Reopening queues have been more common outside pharmacies, rather than malls and stores, as people stock up on antigen tests and medicine to treat cold and flu symptoms .

A spa in a downtown Beijing shopping mall that resumed operations on Friday said most staff had returned but customers were far fewer.

“Because of the epidemic, we are now using promotions and coupons to attract customers, which actually makes us run at a loss,” said one of the masseurs.


Many businesses also say they have been taken on the wrong foot, with one executive at a major hotel chain saying he was “totally unprepared for such a dramatic and drastic reopening”.

With many of its hotels still in quarantine use, it’s proving difficult to persuade owners to open and hire more workers after the zero-COVID campaign spawned a conservative mindset, a- he told Reuters.

“The company is now adjusting its strategy so that 80% of resources are focused on capitalizing ‘revenge’ spending, while reserving 20% ​​of hotel and staff occupancy in the event of a return from quarantine,” added the executive, on condition of anonymity.

Sales of items such as cosmetics, wine and spirits are expected to continue to suffer as cautious consumers stay at home in the coming months, said Jason Yu, chief executive of consumer research firm Kantar Worldpanel. for Greater China.

Instead, people will focus on items that promote health and wellness, buying fewer instant noodles and popular frozen items from those preparing for shutdowns, he said.

Still, some analysts have said even a bumpy reopening bodes well in the long run for companies engaged in China.

Fast food brands, for example, will be able to return to major expansions they had planned.

In 2023, new restaurant development in China will account for about half of global McDonald’s unit openings and about a third of new locations for Starbucks, said Bank of America analyst Sara Senatore.

Luca Solca, luxury analyst at Bernstein, said the end of restrictions was good news for the luxury industry, which is heavily dependent on Chinese spending.

“My base case scenario is that the easing should encourage Chinese consumers to start enjoying life and spending money again, which will benefit big luxury brands, among others,” he said. .

Reporting by Casey Hall; Additional reporting by Joe Cash and Sophie Yu in Beijing, Mimosa Spencer in Paris and Richa Naidu in London and the Beijing newsroom; Editing by Brenda Goh and Clarence Fernandez

Our standards: The Thomson Reuters Trust Principles.

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