Is rent rise affecting consumption in big cities?

By Zhang Yiwu Source:Global Times Published: 2018/9/4 19:13:40

Illustration: Liu Rui/GT

With jokes about cutting back on expenses doing the rounds among the public, talk of a consumption slowdown in China is gaining ground. It's something that deserves attention and in-depth analysis.

The so-called consumption cutback depicts the bitter feelings of big city low-level white-collar workers whose spending has been hit hard by the rapid rise in rent. As property prices remain sky-high, rents in big cities have shot up recently, eating into the income of white-collar workers, who have been complaining online about the squeeze on daily expenses.

As salaries in China's first-tier cities are much higher than in smaller ones, many young people choose to hunt opportunities in bigger cities after graduating. Even those who lack specific skills have the opportunity to find low-threshold jobs and earn much more than they could in smaller cities.

In addition to bringing more money, metropolises provide more opportunities and offer better public services. If real estate prices or rents are not taken into account, cost of living in large cities is not higher than that in smaller ones. Take Beijing's subway fare. For quite a long time, it was fixed at two yuan ($0.3) per journey, probably the cheapest fare in the world. Now it's charged according to distance, but is still much lower than that in some second-tier cities and the bus ticket prices in some third- and fourth-tier cities. The delivery service in big cities is also relatively cheap because of the agglomeration effect.

That is to say, except the rent, spending on clothes, food and transportation in big cities isn't much higher than that in smaller cities. Besides, smaller cities can hardly be compared with larger ones in public services. Some young people can afford to buy a house in their hometown after several years' working in big cities.

The rent rise has a limited impact on young people earning higher salaries, like those working in the IT sector. It can barely influence low-level white-collar workers who own a house. Blue-collar workers in recent years have had rapid rise in salaries.

Take confinement nurses, or yuesao, who are responsible for taking care of new mothers and their infants for a certain period of time, especially during the first month after giving birth when they live in the employer's house. These groups are not really affected by the cutback in consumption. Some people favor affordable fashion brands such as Miniso and Uniqlo. It's actually a new trend of rationalizing expenditure and shouldn't be confused with a reduction in consumption patterns because of a rent rise.

A closer look reveals that the so-called consumption downgrade has mainly hit low-level immigrant white-collar workers with stagnant salaries. They are facing greater challenges. The rise of rent has squeezed the salary gap between large and small cities. They have to cut expenditure in ways big and small. Whether they should leave the big cities has become an important question to consider.

Their living conditions deserve more social concern. However, we shouldn't overly exaggerate the anxiety over a decline in consumption. We must figure out the main groups that are spending less, face up to their distress and challenges, understand their situation and deal with the problem.

With competition intensifying among cities, many small and medium cities are striving to attract more talent through various means with the aim to boost development. Those worrying over reduced consumption power may seize the chance.

The author is a professor of Chinese literature at Peking University.

Posted in: VIEWPOINT

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