A surging consumer confidence is key

The world economic recovery has slowed down this year and the global economy will grow sluggishly. Recovery is coming along better than expected in some countries, but globally, it will still take time.

China's official purchasing managers' index, which measures manufacturing activity, stood at 50.4 in May, the lowest this year. Economic growth in the first quarter was also significantly lower than in the fourth quarter last year.

Results from Ipsos' survey of the national economic confidence index of citizens from 24 countries released on April 26 showed that responses from these countries ran along the lines of "stable", which was basically the same as it has been over recent months. But responses from the same survey in China remained high and led the world in national confidence and economic outlook for the next six months. And the Chinese confidence in their economy is still rising. In the evaluation of the current national economic situation, 71 percent of Chinese respondents believed that the current Chinese economy was stable and in a good situation, ranking third among the 24 countries, next to Saudi Arabia (89 percent) and India (79 percent) and well above the global average (39 percent).

In an outlook of the next six months, nearly half of Chinese respondents (42 percent) believed that the Chinese economy would be "stronger", well above the global average (26 percent).

The attitude in China is markedly different from the conservative attitude that citizens from other countries have toward their national economy. In the face of new situations and new problems in the complex and challenging international and domestic economies, the climbing confidence that Chinese people have in their national economy is impressive. But with China's decline in GDP coupled with this climbing confidence, what is creating this optimism in Chinese people?

Consumers feel national or regional economic developments directly through every aspect of life, from their jobs, spending, investments, housing, healthcare, etc. Our study found that the majority of them were still optimistic about the nation's economic situation this year. Despite a decline in the economy, confidence runs high.

For consumers, salaries and bonuses will undoubtedly become the hottest topics. According to Ipsos research, we found that consumers' concerns about salaries and bonuses have been increasing year after year.

Job stability has always been a major concern for mature Western market economies and with the weak global economy of today, high unemployment rates are headaches for Europe and the US. In China, job stability is also becoming more of a concern. Due to increasing salaries, firmer job stability and an expansion in consumer credit, the willingness to spend remains high - this also promotes reasonable growth in consumption. Domestic demand, especially consumer demand, has significantly become more of a role in boosting the economy, which has created better conditions for the economy to recover and develop. Our study found that an "increase in family life needs" has become the main reason for increased consumer spending.

Our study found that nearly 80 percent of Chinese consumers believed that inflation will continue this year; 90 percent of them expected that fuel, food and basic living expenses would rise. Due to these expectations, consumers have adjusted their investments and managed their wealth in different ways. In our survey, they selected bank savings, stock investments, the lottery and insurance as the main ways of managing family wealth to maintain and increase the value of their property.

The likelihood that there will be universal health coverage in the nation's new medical reform has also given consumers a shot in the arm.

Another main concern of consumers is the appreciation of the yuan. In 2011, the yuan exchange rate was attacked, with an annual cumulative increase of 4.86 percent. Many professionals believe that "in 2012, the tone of the yuan appreciation will not change but the pace will slow down".

Consumer confidence in the Chinese economy is not a blind self-confidence but derives from the direct experiences of life, their trust in the government's macro-control and their intuitive grasp of the domestic and international economic issues. Therefore, it is a necessity that consumers are full of confidence in the national economy.

The author is vice-president of Ipsos in Greater China.