High frequency transaction data reveal offline consumption in China declined by as much as 66% and ended 16% below baseline by mid-April 2020.
We focus on the impact of COVID-19 on consumption, which accounts for over 42% of China’s GDP in the last decade. We use data on the universe of consumer spending transactions at offline merchants using bank cards and QR codes (i.e., linked to e-wallets in Alipay and WeChat pay), captured by UnionPay’s POS machines and QR scanners that cover 30% of China’s total offline consumer spending. While E-Commerce has experienced accelerating growth in recent years, offline consumption still constitutes 76% of China’s overall retail consumption in 2019. We collect total offline consumption for 214 Chinese cities on a daily basis from January 1, 2020 to April 14, 2020 and conduct difference-in-differences analyses (using the corresponding period in 2019 as the benchmark period).
During the twelve-week period, offline consumption fell by 6.6% during the immediate week after Wuhan lockdown, before reaching the largest decline (59%-66%) in the next three weeks after the outbreak. Notably, the consumption change became less negative starting from the fifth week, when the epidemic curve showed signs of flattening and mobility restrictions had yet to be relaxed. By the end of March, consumption had fully rebounded. However, consumption fell again, ending at 16% below the baseline level in mid-April. This retreat is responsive to the one-day lagged number of new infections (including asymptomatic cases), echoing the rising concern over a potential second wave of infections. The recovery is evident for both the goods and services consumption types yet spending on dining & entertainment as well as on travel-related show much weaker rebounds than spending on discretionary items and durable goods.
