HONG KONG/SHANGHAI -- Wang Ren used to stay in bed as late as he could, then make up for lost time by grabbing a taxi to the office. But this year, the 25-year-old financial analyst in Shanghai has turned himself into an early riser. No matter how tired he is, Wang gets up at 7:15 every morning and rushes to the subway, saving himself 21 yuan ($3.05) each way.

While commuting by subway takes nearly half an hour -- almost twice as long as his old taxi ride -- "it costs only four yuan," Wang said.

Wang is hardly alone when it comes to belt-tightening. After years of enjoying the fruits of a booming economy and sharply rising disposable income, Chinese citizens are scrambling for ways to scale back their spending.

Instead of pursuing a "consumption upgrade" -- the phrase Beijing uses to describe Chinese consumers' growing demand for premium products -- more and more people are heading in the opposite direction.

On Zhihu, a Chinese question-and-answer website, an entry asking "What are the best options for consumption downgrade in 2018?" has attracted more than 25 million viewers and generated nearly 2,000 answers. The suggestions include canceling idled gym memberships, skipping the professional wedding photographer and taking on do-it-yourself projects -- including making toothbrush holders out of Lego bricks.

A Beijing subway station: Some cost-conscious commuters are opting to take the train rather than a more expensive taxi. (Photo by Akira Kodaka)

Wang has embraced this scaled-down lifestyle. A weekend evening with his girlfriend used to begin with a romantic dinner, followed by a trip to the cinema to catch the latest Hollywood hit. But this year, the couple shook up their old routine. They started going to the movies on weekend mornings, when tickets are half-price. Fancy dinners at restaurants have given way to takeout -- with a set budget of 50 yuan.

This new frugality may be good for Wang's pocketbook but it is an unwelcome development for Beijing, where leaders are trying to shield China's economy from the U.S. trade war and prop up a battered stock market. Yet despite such efforts, there are signs that the consumption downgrade is beginning to show up in Chinese economic data.

In September, China reported economic growth of 6.5% for the third quarter -- its slowest pace in a decade. Consumer confidence fell in the latest reading, according to global market intelligence company CEIC. And while retail sales rose by a robust 9.3% in the first three quarters of 2018, those figures looked disappointing compared to last year's growth of 10.4%.

The belt-tightening narrative has been strongly disputed by Beijing, which has made a long-term bet that consumption will fuel China's future growth. To encourage citizens to spend more, Chinese leaders recently announced the country's first income tax cuts in seven years, reducing the income tax bill by an estimated 320 billion yuan this year.

Yet consumers and economists say even this is far from sufficient to turn the tide. "Consumption will slow over the coming quarters as the broader economy weakens further," said Chang Liu, an economist at Capital Economics in London.

Gentler growth in consumption is unlikely to trigger a sharp downturn, according to George Magnus, an associate at the China Center of Oxford University. But the numbers could create a false impression as to China's progress in reshaping its economy.

On paper, the share of consumption in China's GDP growth reached 78% in the first three quarters of this year, up from 64.5% last year. But in reality, the apparent rebalancing happened because growth in Chinese investment and exports slid faster than consumption rose, Magnus said.

"The structure of the economy will look improved, but this cannot happen except in the context of weaker overall GDP growth," Magnus said.

Reasons to save

Almost every Chinese consumer the Nikkei Asian Review spoke to blamed their consumption downgrade on soaring living costs. Driven by inflation and higher raw material prices, China's consumer price index rose 2.1% in the first nine months of this year compared to 2017 levels -- and it shows no sign of slowing. In September, prices grew 2.5% year over year, the highest level since the Chinese New Year holiday period in February.

A real estate office in Pudong, Shanghai: For many, rising rents are putting a squeeze on spending. (Photo by Sanmiao Photo)

For Wang, the financial analyst in Shanghai, the rising cost of living can be felt every time he shaves. In 2017, buying a disposable razor cost Wang about 20 yuan. Now, he pays 22 yuan. To cope with the price hike, he has begun to replace his razor every three weeks, instead of twice a month.

While the extra two yuan may sound like small change, this together with higher prices of food, clothes and many other necessities have driven up his living costs by about 10% this year, Wang said. "Our pay raises simply cannot keep pace with the soaring living costs, and that has squeezed space for consumption."

Meanwhile, high housing costs in big cities are shrinking Chinese budgets. Although Wang moved to a cheaper neighborhood this year, renting a one-bedroom condo in Shanghai still costs him 3,600 yuan per month, or one-third of his after-tax salary.

"If the rent were lower, my girlfriend and I would spend more on leisure," Wang said.

For those who seek to own a home, the budget for daily consumption could be even tighter. Chinese urban dwellers earned 29,599 yuan on average in the first nine months of this year, an increase of 7.9% from the previous year. However, that is only enough to buy 2 sq. meters of a newly built flat in Chinese cities, where the average housing price reached nearly 13,000 yuan per sq. meter in August, according to Shanghai-based research company E-House.

And while Chinese families have come under pressure from rising living costs, their job prospects have taken a hit. China's employment index -- a measure of demand for factory workers -- remains in negative territory this year, thanks in part to the U.S.-China trade war.

Some mainland Chinese companies are moving production to other countries, many of them in Southeast Asia. Electronics manufacturer GoerTek, a major supplier to Apple, for instance, is considering shifting its production to Vietnam to avoid Washington's punitive tariffs. The company currently employs 26,000 factory workers in China.

Moreover, people in China are finding it increasingly difficult to earn side incomes. Among them is Guo Liyan, a 48-year-old radio host in Suzhou, Jiangsu Province, who has struggled to make ends meet since the Chinese financial market withered this year.

"My salary is too low to cover my spending, so I have to rely on capital gains to pay the bills," Guo told the Nikkei Asian Review. China's financial markets had treated her well until recently, when peer-to-peer lending, her favorite place to park her savings, turned south. Guo lost an investment of 370,000 yuan as one defaulted platform ran away with her money and another postponed their repayment.

Other investment options are not a safe bet, either. Chinese stocks have been among the world's worst performers this year, with the benchmark CSI 300 Index tumbling more than 20% between January and October.

"I don't dare invest in any financial products anymore. I'm too scared," Guo said. But without the help of high-yielding investments, she is no longer able to shop at Sam's Club, a premium retail warehouse operated by Walmart.

She has also cut out shopping sprees for luxury goods. Guo bought more than 10 handbags when times were good -- Louis Vuitton was a favorite. Her biggest purchase so far this year is a cold-press juicer priced at 3,000 yuan.

Guo's new budget realities are also being felt by her feline companions. Once happy consumers of Royal Canin, a pet food imported from France, her four cats now must make do with a Chinese product that saves her 150 yuan each month.

In October, China's discretionary spending index fell to its lowest level since August 2016, according to a survey conducted by FT Confidential Research. The survey also found that fewer consumers in the country intended to increase their spending in the next six months, dragging the expectations of consumption growth to a 17-month low.

Such trends are evident in central Shanghai, where the ritzy Citic Square shopping center seems to be having a hard time attracting customers. On the fifth floor, the sit-down restaurants have few customers, but the Family Mart convenience store is bustling. The eat-in section was packed with people eating lunch, and many more are queuing up in front of the cashiers.

A man uses his phone to scan the QR code and unlock a shared bike. Shared bikes can be rented for as little as 0.5 yuan for half an hour. (Photo by Cui Nan)

Xiang Jing, a 24-year-old office worker, said she comes frequently because "it only costs me about 10 yuan for a box lunch."

She used to dine out with her colleagues, but lately this seems like a splurge. "I feel wasteful paying 50 yuan for lunch lately."

Still splashing out

But not every Chinese is cutting back. In rural China, once viewed as the country's economic backwater, local residents are happily opening their wallets. While Chinese villagers still lag far behind their urban cousins in terms of purchasing power, their per capita consumption expenditure increased by 12% in the first three quarters of this year. The figure was 6.5% in cities.

One new spender is Xu Pengfei, a rural entrepreneur in northern China's Shaanxi Province. With e-commerce flourishing in the country, Xu has taken advantage of the digital boom to open an online vendor selling pomegranates, sweet potatoes and other local specialties. As his income has shot up, so has his spending. Xu is now a frequent buyer on JD.com, a Chinese online marketplace known for its better-quality and higher-priced products. In June, Xu bought an air conditioner for 6,000 yuan. The factory-worker-turned-businessman also plans to take his family on a trip this year.

Tourism, alongside education and fitness, is among a handful of sectors in China that have maintained their momentum despite the economic downturn. During the weeklong national holiday in October, about 7 million Chinese traveled abroad, up from 6 million people during the same period last year. But even so, Chinese travelers seem to have spent less than they used to.

Huang Xinting, a translator in Fujian Province, recently changed her choice of travel destination from Hungary to lower-cost Indonesia. And for a price difference of 4,000 yuan, Ayu Su, an educator in Guangzhou, headed to Sri Lanka instead of Hokkaido, even though she has dreamed of visiting the Japanese island for years.

Some Chinese intend to spend less despite their improved financial status. One case in point is Zhang Zhaohui, a public relations specialist in Beijing who enjoyed a nearly 30% pay raise this year but decided to cut back on her spending regardless.

"I'm not cash-stressed, but I'm so concerned about China's economic outlook," Zhang said. Her recent house-hunting served as a fresh reminder of how rapidly living costs in the country can increase. In 2017, Zhang paid 4,600 yuan per month for a one-bedroom condo in Beijing. This year, renting a comparable flat costs her 5,200 yuan.

"The higher rent hasn't affected my purchasing power much, at least not for now, but it has stirred up anxieties," Zhang said. To save for rainy days, the 30-year-old has switched from eating out for lunch to bringing her own lunchboxes at least three times a week. Zhang does not commute by taxi anymore. Instead, she now walks to work.

Zhang Zhaohui, a 30-year-old living in Beijing, used to dine out, but this year she started cooking at home at least three days a week. (Photo by Cui Nan)

"I'm also considering not buying new clothes this winter," she said.

The sea change in consumer behavior has apparently worried Beijing. In September, China's cabinet pushed for supportive mechanisms to boost consumption, following its move in August to raise the threshold for collecting income taxes to 5,000 yuan per month from the previous 3,500 yuan. But "the additional take-home cash is too little to make a difference," Zhang said.

In Shanghai, Wang has the same idea. "The new tax policy gives me an extra 500 yuan each month, but having a good meal in Shanghai would cost 300 yuan," he said.

While the new policy also allowed Chinese taxpayers to deduct expenses such as mortgage interest and children's education for the first time, Wang does not want to take advantage of those deductions anytime soon.

"China's sky-high property prices have discouraged many, myself included, from buying a home and raising a family," Wang said. "For my girlfriend and I, having a dog is good enough."