They used to buy branded items but now look for bargains at wholesale markets

Households' confidence, spending power are low in China with wages and pensions hardly budging

BEIJING/HONG KONG (Reuters) – Amy Zhang used to buy branded fashion from shopping malls, but China's economic uncertainty has driven the 35-year-old teacher, and other middle-class Chinese like her, to shop at one of Beijing's most famous wholesale markets.

Daliushu Guanxin, a sprawling compound of thousands of stalls selling everything from clothes to shoes to accessories, is usually frequented by tourists, students, rural migrants and retirees looking for cheap goods.

Now, many more shoppers who can afford to spend more have joined the bargain-hunters, underscoring the weakness in household demand which has emerged as a key drag on the world's second-largest economy.

"I used to love buying branded clothes," said teacher Zhang as she sifted through a pile of garments priced between 15 and 50 yuan ($2-$7). "But some of my friends are worried about losing their jobs and that affects me as well."

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With wages and pensions hardly budging and the job market highly uncertain as more than one in five young Chinese remain unemployed, households' confidence and spending power are low in the barely growing economy.

Consumer prices rose just 0.1 per cent year-on-year in August, in sharp contrast with the surging inflation most other major economies have seen since the COVID-19 pandemic ended.

"It's really a confidence issue, but the problem is that there's no particularly good way to resolve that right now," said Becky Liu, head of China macro strategy at Standard Chartered.

"If you want to restore confidence, you either have to stimulate real estate significantly, or you have to give cash directly to households, and I don't think those options are available right now," she added. The real estate sector, one of the pillars of the economy, is struggling with massive debt.

Luxury executives have been banking on China to help boost overall sales in 2023, but the new-found thriftiness of the middle class, which companies from LVMH to Gucci-owner Kering have courted for years, could pose a problem.

"I came here for cheap clothes to save on my living expenses," said a 45-year-old shopper who only wanted to be identified by her family name, Lu.

This bargain-hunting, however, has proven a boon for Daliushu's merchants.

A vendor in her 50s who only gave her first name as Yunshan said she has so many customers visiting her shop at the market that she's struggling to keep the online store running.

"I am too busy," she said. "I've had to refuse requests from online customers because I don't have the time to arrange deliveries."

Another vendor surnamed Wang said that most days, there were so many customers inside his store that he has to stand outside the shop to monitor them. He noticed some of his clients looked wealthier than usual.

"One of my customers is a rich woman who used to go to Japan for shopping, but now she comes to my store," said Wang.

"She is not stupid. It's the same quality, so why spend more money.