As the propaganda machine gears up for the October 1 celebration of 70 years of Communist party rule, China’s consumers appear relatively upbeat. However, short-term sentiment readings are masking deeper-seated concerns.

Among urban consumers, 22 per cent would permanently leave China if they had the means to do so, according to a survey of 1,000 consumers by FT Confidential Research. This rises to 36 per cent of our high-income group, defined as those living in households earning more than Rmb300,000 ($42,122) a year. Overall, 64 per cent of the 1,000 surveyed said they would not emigrate, although in first-tier cities such as Beijing and Shanghai, this falls to 59 per cent. 

The survey findings undercut the triumphalism surrounding this year’s anniversary of the People’s Republic, whose centrepiece will be a military parade through the heart of Beijing. While security tightens in the run-up to the holiday, the party has ramped up a message about the benefits that its rule has brought the Chinese people, not least in raising their standards of living.

But the fruits of Chinese economic development have been distributed unequally. China’s world-class infrastructure and manufacturing prowess have come at the cost of widespread environmental degradation and years of underspending on public health and education. A luxury apartment or three, a German-branded SUV and the latest rose-gold smartphone cannot compensate for food grown in poisoned soil and underfunded, oversubscribed state hospitals and schools.

Country-level data show Chinese taking advantage of their rising incomes to emigrate. In the US, mainland Chinese have risen to 5 per cent of the foreign-born population from 3.5 per cent in 2006, and account for nearly 10 per cent of foreign-born Australians versus 5 per cent in 2006.

This long-term emigration trend detracts from generally positive readings from our latest monthly gauge of household sentiment in China. At 71.8, our September China Consumer Index was well above the 50-mark that separates improving from deteriorating sentiment, and was in line with the average of the previous 12 months.

Despite evidence that growth has continued to slow into the third quarter, 54 per cent of respondents said they believed China’s economic situation had improved over the past six months, versus just 17 per cent who believed it had deteriorated, while 68 per cent said they expected it to improve in the coming half-year. Key monthly measures of household incomes and spending also suggested that consumption was still in fairly good shape in September.

However, while these results indicate consumers are in good cheer and in a position to support the economy as other key drivers falter, there are also signs that sentiment is fragile, and that the resilience consumers have shown so far this year may not be sustained.

Given the choice, 44.1 per cent of respondents said they preferred to save in the current climate rather than consume or invest, which was the third-biggest proportion since mid-2013 and speaks to their growing uncertainty about economic conditions. Despite income tax cuts this year, our data show consumers would rather squirrel away any extra income than spend or invest it.

Resurgent inflation is only adding to household uncertainty. The most recent official data show nominal urban incomes rising 8 per cent year on year, while consumers in our latest survey estimated their cost of living rose 8.1 per cent over the same month last year (despite surging pork prices, the official consumer price index is still rising less than the 3 per cent target).

For homeowning Chinese, who make up around 90 per cent of urban residents according to our survey, rising prices were less of a concern, given that the value of their main household asset was increasing.

Now that property prices are cooling and it is instead the prices of fruit and meat that are surging, consumers may have less cause for cheer and greater motive to think about a new life overseas.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.