An increasing number of Chinese consumers are jettisoning their brand-conscious and consumption-oriented lifestyles, choosing essentials over non-essentials amid an economic slowdown and dimmed employment prospects, Fitch Ratings reports. 

This comes as China adheres to its “Zero-Covid” policy and a regulatory crackdown on sectors ranging from property and technology to private education. 

Meanwhile, consumers also prefer online shopping over venturing to stores amid Covid-19 pandemic-induced mobility controls.

The consumer confidence index has been thwarted to historical lows since China’s second wave of Covid-19 started in April 2022, according to the National Bureau of Statistics, led by the employment expectation sub-index. 

Expectations of future employment plunged in 2Q22, according to the People’s Bank of China’s quarterly surveys of 20,000 urban households in 50 cities, although it showed a slight rebound in 3Q22. 

The unemployment rate reached a 26-month high of 6.1 percent in April before easing to 5.5 percent in September.

Some consumers have moved away from a free-spending style as GDP growth has slowed in recent years. 

Pandemic control measures starting in 2020 have further pushed consumers to abandon excessive spending on discretionary items, such as luxury goods. 

This trend has further picked up pace, with necessities and practical value-for-money goods featuring more prominently on shopping lists, as shoppers become more pragmatic and conservative in balancing spending, saving and investing. 

The People’s Bank of China’s survey revealed that fewer consumers planned to “spend more” in 1Q20, when the first wave of Covid-19 struck, ending a long streak of rising spending intentions.

Pinduoduo Inc., which has the tightest focus on bargain shoppers among China’s big-three online retail platforms, recorded year-on-year revenue growth of 36 percent in its April-June quarter, while revenue from Alibaba Group Holding Limited’s (A+/Stable) domestic retail platform declined by 2 percent and the retail operation of rival,, Inc., posted a gain of just 4 percent.

Sales of discretionary items also underperformed those of essentials at Alibaba’s Tmall and Taobao online marketplaces over 9M22, except for outdoor gear and home decorations, which benefited from pandemic control measures.

Online retail has been one of the few resilient segments under China’s stringent pandemic-control policies, with government officials frequently forcing the closure of stores to prevent Covid-19 transmission in high-risk areas. 

Even in low-risk regions, many cities still require citizens to show negative results from Covid-19 tests taken within the previous 24-72 hours to access shopping malls, supermarkets, restaurants, and stores. 

Given the time and hassle involved with testing and the risk of being swept into quarantine, online shopping continues to grow in appeal.

Fitch projects online retail to reach about 29 percent of China’s goods sales in 2022, from 23 percent in 2019, although sales may suffer due to surging prices of petroleum products, a major category of retail goods. 

In turn, the true figure is likely to be even higher, as official data are likely to be understated due to the exclusion of online-offline integrated retail – dubbed “New Retail” – which has been prospering in the past few years.

The rating firm argues that uncertain employment prospects and ongoing pandemic-related controls will temper consumption growth until China’s economy shows strong signs of bottoming out. 

Even as the pandemic recedes, many are letting go of their luxury-driven lifestyles and sticking with online shopping, helping to anchor this behavior pattern.