Chinese households accumulated $2.6 trillion in new savings last year. The number is the largest in history, as lockdowns curbed consumer spending. Meanwhile, the Chinese government is targeting consumption to drive the country’s economic growth post lockdowns.
The COVID restrictions in China of the past three years have led to slower economic growth, but with the Spring Festival wrapping up and people heading back to work, there are signs of economic recovery.
“I have been seeing people coming back to work, streets are crowded, malls are crowded. We are starting to see traffic jams. These are very good signs of normalcy,” said John Gong, professor of economics as the University of International Business and Economics in Beijing.
China recorded slower consumption numbers than normal during the lockdowns. Household spending, the amount spent to meet households’ everyday needs, was 38 percent of Chinese gross domestic product in 2021. This statistic is typically around 60 percent of a nation’s GDP, according to the Organization for Economic Co-operation and Development.
“I think normally you would expect for the Chinese economy, 50 percent should be in consumption. Less than 40 percent is something abnormal here,” Gong said.”I think the normal number should be around 50 percent. I think there is a lot of room to grow here.”
Meanwhile, China’s national gross savings rate has seen record increases.Savings grew to $2.6 trillion in 2022, according to the People’s Bank of China. Will this and the easing of COVID give Chinese the confidence to spend it?
“In terms of consumption moving forward, for the richer people, for the well-off people, for the middle-class people and upper middle-class people, they have the means to spend in my view, their consumption is going to definitely be much stronger this year,” Gong said. “Now for the rest of the population, people more on the edge and those struggling in life, I think they’re still being very cautious about spending. They still have the mindset of preparing for future uncertainties. So, it is a matter for the government to relieve their concerns.”
The Chinese government is now focused on accelerating consumption to aid in recovery. China’s State Council Executive met on Jan. 28 and announced a plan to boost consumption.This includes policies that support consumer service businesses, and increases in consumer loans.