The economic landscape in China is undergoing a significant transformation, largely driven by the financial habits and attitudes of Generation Z (born roughly between 1997 and 2012). This shift in mindset has become increasingly visible since the onset of the pandemic, deepened by the crisis in the property market, and is now intensifying as young people embrace frugality and a more cautious approach to spending. This behavior starkly contrasts the free-spending attitudes of earlier generations and presents a new challenge for policymakers, who had been counting on consumer demand to bolster China’s economic recovery.

A Shift in Attitudes

In the past, China’s youth were known for their enthusiasm to spend. The so-called “moonlight” generation, born in the 1980s and 1990s, lived paycheck to paycheck, often spending all their earnings without much thought to saving. With the booming economy and expanding job opportunities, there seemed little need for financial restraint. However, today’s young people, particularly those in their 20s, are taking a different approach. They have witnessed a series of economic disruptions: the pandemic, the real estate market downturn, job insecurity, and the ongoing regulatory crackdown on the tech industry. As a result, a sense of caution has taken hold, with many opting to prioritize savings over spending.

On China’s popular social media platform, Xiaohongshu (known internationally as Little Red Book), young influencers are increasingly sharing tips on frugal living. There are millions of posts offering advice on how to save money, from cutting back on office lunches to shopping for discounts. This growing trend highlights a deeper cultural shift in how Gen Z views financial discipline, transforming it into a lifestyle. Posts tagged with the concept of saving have garnered more than 130 million views, a clear indication of the widespread appeal of this frugal mindset.

Ava Su, a 26-year-old who works at Alibaba, exemplifies this new attitude. Despite earning a comfortable salary, Su has reduced her spending and developed a long-term plan to save up 2 million yuan ($273,512). Her focus is on securing her financial future in a landscape that feels increasingly uncertain, even in a city like Hangzhou, where the internet industry is seen as an unstable field. Su’s story is not unique; many of her peers have begun to view saving as a form of self-protection, preparing for what they perceive as an unstable future.

The Rise of Financial Discipline

This shift in behavior is not just anecdotal. Data from Yu’e Bao, a popular online money market fund available on Alipay, reveals that young people are saving more than ever. As of the end of 2024, users born after 2000 were making an average of 20 deposits per month, double the amount seen earlier in the year. This reflects a deepening commitment to saving among a generation that is far more financially cautious than its predecessors. Additionally, the amount of money saved by each individual in Yu’e Bao accounts has surged by 50%, signaling a significant increase in the financial discipline of China’s Gen Z.

However, this move toward saving has raised concerns among economists. Some experts warn that if the trend continues, it could further depress consumer demand, a situation that would compound the challenges faced by China’s economy. Policymakers have long hoped that consumer spending would play a critical role in bolstering China’s GDP growth, but the current trend toward saving could undermine this plan. The economic slowdown, coupled with the uncertainty surrounding the real estate market and employment prospects, is causing many young people to rethink their financial priorities.

Job Insecurity and the Desire for Stability

One of the key factors driving Gen Z’s cautious approach to spending is the high level of job insecurity. Unemployment among China’s youth, particularly those aged 16-24, has reached alarming levels in recent years. In June 2023, the youth unemployment rate hit a record high of 21.3%, prompting the government to reassess the way it reported these numbers. While the official youth jobless rate was recalibrated to 15.7% in December 2024, it remains significantly higher than the national average, painting a picture of an uncertain job market.

As a result, many young people are turning to more stable career options. Some are seeking government jobs, which are seen as providing a reliable income and job security, known colloquially as the “iron rice bowl.” Su, for example, plans to take the civil service exam in the future, seeking the stability that comes with working in the public sector. This shift toward seeking secure government or state-owned enterprise jobs marks a departure from the entrepreneurial spirit of earlier generations, who were more willing to take risks in the private sector.

Lily Li, a 26-year-old high school teacher from Shenzhen, provides another example. After working in the corporate world, Li transitioned to teaching for the job security it offers. Although she earns a decent salary, she saves 80% of her monthly income, cutting back drastically on non-essential expenses like clothes or entertainment. Li’s shift in priorities reflects the broader trend of young people seeking stability over adventure in a time of economic uncertainty.

The Cultural Context: Lying Flat and Involution

This change in mindset is not just an economic phenomenon but also a cultural one. In recent years, terms like “tang ping” (lying flat) and “involution” have gained popularity among Chinese youth, encapsulating the sense of frustration and disillusionment many feel. “Tang ping” refers to opting out of the intense competition and relentless hustle that characterizes modern Chinese society, while “involution” describes the feeling of being trapped in an endless cycle of work and study with no meaningful progress. These terms reflect a generation’s struggle with societal pressures and the sense that their hard work might not yield the rewards they were promised.

The rise of these cultural movements underscores the growing existential angst among China’s Gen Z. While earlier generations aspired to a better quality of life through hard work and consumption, the current generation feels less optimistic about their prospects. This shift in outlook has contributed to the broader trend of saving and financial caution.

The Economic Implications of the Saving Trend

The focus on saving rather than spending has significant implications for China’s economy. As Gen Z’s savings grow, demand for goods and services, particularly mid-range products, is weakening. Companies are facing intense price competition as they struggle to attract consumers who are less willing to spend. This could lead to disinflation, a scenario where prices stagnate or decline due to decreased demand, which could further undermine economic growth.

Gary Ng, a senior economist at Natixis, suggests that this consumption downgrade could hollow out mid-price range products and services, ultimately slowing China’s long-term growth potential. While China’s GDP growth for 2024 was reported at 5.0%, experts predict that growth will continue to ease in the coming years, with the country facing an economic slowdown that could become entrenched if consumer confidence does not rebound.

Looking Forward: The Need for Policy Adjustments

Given the increasing financial prudence of Gen Z, policymakers in China may need to rethink their economic strategy. While the government has long relied on consumption to drive economic growth, the current generation’s focus on saving presents new challenges. In order to stimulate domestic demand, China may need to find ways to restore consumer confidence and create incentives for spending.

Moreover, the trend of seeking job stability and the growing preference for government positions might necessitate adjustments to labor market policies. Encouraging entrepreneurship, improving job prospects in the private sector, and addressing issues of income inequality could help alleviate some of the pressures facing young people today.

In conclusion, the financial discipline embraced by China’s Gen Z is a response to the economic challenges and uncertainties they face. While their cautious approach to spending presents obstacles for policymakers, it also reflects a deep-seated desire for financial security in an unpredictable world. Whether this shift toward saving will continue or whether it will be tempered by future economic growth remains to be seen, but it is clear that China’s economic future will be shaped by the financial habits and priorities of its younger generation.

(Adapted from Reuters.com)