Global Economy: No Help from China's Consumers

Hopes that China's growing middle class would ride to the economic rescue have been dashed as Chinese hunker down and save

Shanghai: Slowing sales are hurting margins for retailers David Butow/Redux

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By Dexter Roberts and Chi-Chu Tschang

November 26, 2008 at 5:00 AM UTC

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Jack Tan was a Western marketer's dream. The 24-year-old bank manager from the southern Chinese city of Shenzhen regularly spent a big chunk of his $1,200 monthly salary at Pizza Hut (YUM), McDonald's (MCD), and TGI Friday's. He wears Nikes (NKE), carries a Nokia (NOK) phone, and listens to Linkin Park and Green Day on his iPod (AAPL) nano. His pick-me-up? A latte at Starbucks (SBUX).

But lately Tan has changed his ways. Much of his $30,000 in savings has evaporated with the Chinese stock market, down more than 60% this year. When he eats out, Tan frequents local Chinese noodle and dumpling shops, and his plans to buy a car have been put on hold. Instead he expects to salt away half of his salary next year. "Everyone is saving so we can make it through the hard times to come," he says.