Consumer trends in China: Q3 2021

• China will maintain its zero‑Covid strategy in 2021‑22, meaning that mobility restrictions will be maintained to varying degrees, and this will weigh on in‑person consumption.

• Structural issues like high youth unemployment and low wage growth will also act as drags on private consumption in 2022.

• However, under the official “common prosperity” campaign, the government will seek to expand the size of the middle class, which will be positive for headline consumption growth in the long term.

We have revised down our retail sales forecast for 2021 as a whole to 13.1%, from 13.8% previously. This comes amid an easing in inflation; we expect the consumer price index to moderate to 1.3% this year. Retail sales growth in the third quarter of this year will be weaker than previously expected because the government introduced mobility restrictions to curb the spread of the Delta variant of Covid‑19 during that period. This affected domestic travel and in‑person spending over the school holiday period, where there is normally an uptick in tourism.