Morgan Stanley's China assessment

Morgan Stanley predicts that Chinese consumers won’t return to their pre-COVID-19 spending levels anytime soon. That could be a problem for international brands like Starbucks. After a 9% recovery in Chinese consumer spending this year, Morgan Stanley analysts are forecasting a 4.8% increase next year, down 0.5 percentage points from before the pandemic. That could be a problem for international brands like Starbucks, according to the report published by Stanley. Not only are people more cautious about spending, they also have more options. Three factors are weighing on the Chinese consumer’s spending side this year, according to Morgan Stanley analysts. First, China has not been distributing incentives to consumers like the U.S. and other parts of the world have done post-COVID-19. Second, pandemic restrictions and regulatory changes have wiped out 30 million service sector jobs that analysts estimated existed before COVID-19. About 20 million of those jobs will return this year and beyond, according to the report. But analysts expect the remaining 10 million to take longer to recover, as they are affected by Beijing’s crackdown on education, internet technology and property. Third, the housing market remains persistently soft. Morgan Stanley analysts previously noted that property sales led the recovery in the first half of 2021. The pandemic and subsequent measures have caused difficulties for the Chinese economy in 2020-2022. Since the lifting of restrictions in December, the economy has only grown moderately.