This is the first part in a series that explores the current state of consumption across China, including a look at the expenses that many families find most pressing.
For Liu Hao, the mother of an 11-year-old boy in eastern China’s Ningbo city, July brought her biggest set of monthly expenses in more than three years.
Besides everyday living costs, she spent more than 40,000 yuan (US$5,500) on her son alone – about 25,000 yuan on a study trip to Japan, 10,000 yuan on an after-school tutoring centre, and the rest for summer camp.
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“There’s a reason kids are called gold-swallowing beasts,” she quipped, using a popular Chinese nickname used to describe high child-rearing costs.
“His father and I don’t dare to spend too much on other items, since our salaries have stagnated for the past couple of years,” said Liu, who works at a trade company. “If there’s one thing that we’re still generous with, it’s our child’s education.”
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While broadly tightening their purse strings amid weak income expectations in a slowing economy, Chinese consumers are still splashing out on educational products, even as the government has been discouraging extra academic work for students for the past couple of years.
This is the first summer holiday following three years of restricted mobility, and this month marks two years since Beijing’s crackdown on for-profit academic tutoring, upending a US$70 billion industry.
Many parents have responded by sending their children on study trips, hiring illegal private tutors and pushing hard to give kids an advantage in school at a time when an outsized portion of teens and young adults are failing to find work.
Although authorities haven’t touched on anything related to educational services in a series of measures to boost household spending recently, education has become the greatest expense for many families as they shy away from an ailing property market and remain cautious about buying consumer durables such as cars and home furnishings.
Some tutoring institutions have found new life by offering non-academic courses amid loosening government scrutiny as Beijing is shifting its focus to bolstering the nation’s economic recovery.
Liu said her son’s English school changed a course name to “public speaking in English” while providing the same tutoring as before.
A Shanghai-based mother, surnamed Luo, whose son is in primary school, said the boy goes to a daycare centre every workday during the summer holiday. Teachers there help him prepare for new school lessons in the autumn term.
“Competition is so fierce. It seems everybody is doing extra study, so I can’t let him stay at home doing nothing in the holiday,” Luo said.
Meanwhile, study trips targeting young students have flourished, with crowds of student groups at major attractions, such as Tsinghua University in Beijing and the Shanghai Astronomy Museum, making news headlines.
Searches for the phrase “study trip” on major online travel agency ly.com surged by 203 per cent in the first two weeks of July from the same period last year, according to a report by the firm.
Also with a daughter who is already in high school, Luo said she spends nearly 250,000 yuan a year on off-campus tutoring for her two kids, not counting expenses on other activities.
“This amount has been increasing as they grow older, because prices grow according to students’ grades,” she said.
For her daughter, a two-hour class costs 350 yuan, and it goes up to 800 yuan if it’s one-on-one, said the housewife, whose husband runs a construction company.
“We’re lucky, as our income has not been affected much in the past couple of years. But we won’t invest in our children blindly. After all, it’s not easy to make money now,” she said.
The Chinese economy grew by a lower-than-expected 6.3 per cent in the second quarter, mainly due to a low comparison base from the same period last year, while exports tumbled and the housing market slid.
Despite their traditional tendency to save money, especially in uncertain times, Chinese households, began dipping into their excess savings in the first half year, amid “a faster rebound in consumption than in incomes”, according to a research note from Standard Chartered earlier this month.
Actual savings by urban households returned to normal levels in the first six months after people saved 5 per cent more than the amount implied by their pre-pandemic saving behaviour during the 2020-22 Covid period, it said.
Bian Lu, who owns an educational company in Nanjing, Jiangsu province, that focuses on logical thinking for preschoolers, said while there were a few cases in which students quit halfway, due to financial problems of their parents, she hasn’t seen much change in Chinese parent’s traditional obsession with education.
“I don’t see a trend of ‘lying flat’ because of the clampdown on the tutoring sector. The demand is still there for urban families, from my observation,” she said, referring to the social mentality of rejecting relentless work and striving for nothing.
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Having two boys herself, both in primary school, education expenses account for more than a third of her family’s total annual expenditures, she said.
The policy change has not led to a fall in this ratio, because so far, the money has mostly gone to activities unrelated to academic studies, such as art and sports, she said.
Beijing outlawed the country’s thriving private tutoring for school subjects such as maths and English in July 2021, in an effort to promote social equality. Countless firms fell, and billions of dollars worth of tutoring-related stocks were wiped out.
“China’s middle class, including myself – if it’s appropriate – have won their income and status by receiving education, haven’t they? So, they believe in the power of education from the bottom of their heart, and hope the same could happen to the next generation,” Bian explained.
Though the expansion of China’s higher education means university graduates are becoming less competitive, parents still pin hopes on a good education for their children to secure a stable job in the future, she said.
China has witnessed a worryingly high jobless rate among young adults aged 16-24, which hit a record of 21.3 per cent in June, official data suggested.
Xiong Bingqi, director of the 21st Century Education Research Institute, said that two years after the crackdown, the size of the private tutoring market has shrunk significantly, but not the demand from families.
“Some organisations that used to operate legally and pay taxes have now gone underground and are not paying taxes,” he said. “How to deal with them has become the key issue ... it’s having a bad influence on the sector.”
As economic recovery has sat atop Beijing’s agenda since China’s full emergence from zero-Covid restrictions earlier this year, authorities have been encouraging consumers to spend more on a wide range of items, from cars to sporting events, by rolling out stimulation plans.
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The education industry’s glaring omission from Beijing’s plans does not bode well for its role as an economic driver.
“It’s not possible for the sector to recover to how it was before the crackdown, but we hope there will be a moderate opening so families’ needs can be met,” Xiong said.
Professor Zhang Jun, dean of the School of Economics at Fudan University, called for less government regulation over the entire service industry, where he believed most of China’s household spending will go as the economy grows and living standards improve.
“The real growth lies in, first of all, housing, and then medical and educational needs. When we keep regulating these areas tightly, people have very limited access to services, but we’ll have better and cheaper services to consume if there’s a mature market with much competition,” he said.
He also urged the central government to increase spending on family-welfare initiatives, including expanding the compulsory education system from nine years to 12 years to ease the burden people feel from having to pay for those last three years – which could prevent them from consuming.
“Such measures will work better than offering cash or coupons to stimulate one-off consumption, because people will feel freer to spend when they feel safer,” he said.
China is one of the most costly countries in the world to raise a child, according to a study by the YuWa Population Research Institute issued in April.
The cost of raising a child until the age of 18 in China was 6.9 times its gross domestic product (GDP) per capita, twice the rate in Germany and three times that in France, it said. This is second to only South Korea, where the cost was found to be 7.79 times higher than its GDP per capita.
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