China’s reopening sees Gen Z ready to splurge after lying flat: ‘They don’t see life as a matter of ruthless survival’

beijingwalker · Apr 15, 2023

China’s reopening sees Gen Z ready to splurge after lying flat: ‘They don’t see life as a matter of ruthless survival’

BYNICHOLAS GORDON
April 15, 2023 at 5:00 PM GMT+8

Four months after China’s chaotic opening from COVID-zero, conspicuous consumption in China has returned, and the country has continued its long-running love affair with luxury goods. Shares in LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury group, jumped 5.7% on Thursday after the company announced expectations-beating sales growth earlier this week, with notable strength in China.

The jump briefly made the company the world’s tenth largest and propelled the net worth of LVMH CEO Bernard Arnault—who surpassed Elon Musk the world’s richest man in 2022—to $210 billion. Yet there may be more happening than just a resumption of pre-pandemic spending patterns.

Youth culture in China is changing its attitudes towards work and personal comfort—such as the social media trend of “lying flat” that emerged over the last several years—and that may end up changing the country’s economy in permanent ways.

“These young people like leisure more,” Keyu Jin, associate professor of economics at the London School of Economics and author of the forthcoming The New China Playbook: Beyond Socialism and Capitalism, told Fortune. “They don’t see life as a matter of ruthless survival.”

That changing attitude could be a new twist in the story of China’s economic development. Previous generations bought less and saved more, fostering an economy fueled by manufacturing and cheap labor and turning it into the “factory of the world.” But today’s young Chinese, with different expectations on individual comfort, could be, to paraphrase former leader Deng Xiaoping, developing a version of conspicuous consumption with Chinese characteristics.

The return of consumption

China’s COVID chaos in December and January helped drag down corporate earnings. Companies like Apple and Starbucks reported falling retail sales in China, as consumers stayed home amid the country’s record outbreak.

Now, however, multinational companies are seeing sales recover.

On Wednesday, LVMH, the French owner of brands like Tiffany and Dior, reported global quarterly sales of $23.1 billion, a 17% increase year-on-year and ahead of analyst expectations.

Sales in Asia (excluding Japan) grew by 14%, compared with an 8% drop the previous quarter. LVMH does not report China sales separately, but the company’s CFO, Jean-Jacques Guiony, told the Financial Times that China accounted for about 80% of the company’s Asia activity.

“We were very affected by events in China in December, our business was practically at a standstill,” Guiony said, referring to China’s repeal of COVID controls and a simultaneous wave of COVID cases.

But “we’re definitely out of the zero-COVID period now, the page has turned,” Guiony said.

LSE professor Jin thinks that discretionary spending will rebound in the immediate term, yet durables consumption may take a while to recover as confidence rebuilds. “There’s a lot to expect in terms of a big rebound in consumption, but only in certain types,” she says.

Consumer sentiment in China has recovered to the same level it was last March, according to Morning Consult’s most recent Global Consumer Confidence Report, released Friday. Consumer confidence is now back to where it was before a two-month lockdown in Shanghai, which ran from April to June 2022, which sparked months of COVID lockdowns and other disruptions that dragged down the economy.

Chinese retail sales grew 3.5% year-on-year during January and February, beating expectations. Chinese leaders have declared consumption a “topmost priority,” but slowing consumer inflation might indicate that overall consumer spending is losing steam.