China's household savings hit new high amid COVID recovery

On January 27th, people visit Jianchang old city during the Spring Festival holiday in Xichang, Sichuan province. LI JIEYI BEIJING - Financial experts believe that the pent-up demand for consumption in China will be further boosted as household savings in the country hit a new high last year.

In 2022, China's new household deposits soared by 17.84 trillion yuan $2.6 trillion and 7.94 trillion yuan more than in the previous year, said Liu Guoqiang, deputy governor of the People's Bank of China, at a news conference earlier this month.

Liu attributed the increase in savings to changes in consumption and investment. The COVID 19 epidemic has had a significant impact on consumption, while the risk appetites of residents decreased and investment growth slowed, he said.

In the fourth quarter of 2022, 61.8 percent of residents were planning to save more money, up by 10 percentage points year-on-year, while those who preferred to spend more money accounted for 22.8 percent, down 1.9 percentage points from the previous year, according to a depository survey from the central bank.

There is a concern about the Chinese economy that people might worry about the pandemic and not return to normal consumption habits despite its optimized COVID 19 policy. Their collective actions can lead to permanent scars in consumption.

Morgan Stanley Chief China Economist Robin Xing told Xinhua News Agency that data on consumption and mobility during the Spring Festival holiday has likely put such concerns to rest, according to the data on consumption and mobility during the Spring Festival holiday.

The extra saving is precautionary as consumers save more because of an uncertain income outlook, and this process could be partially reversed, Xing said.

China's consumption has rebounded quickly, with some sectors returning to pre-pandemic levels.

More than 308 million domestic trips were made during the weeklong Spring Festival holiday that ended on January 27, up 23.1 percent from the same holiday last year, according to the Ministry of Culture and Tourism.

Retail and catering are also thriving, as are other industries. The Ministry of Commerce said that the total revenues of major retail and catering businesses rose 6.8 percent from the last Spring Festival holiday.

Consumption has been significantly released after the optimization of the pandemic prevention and control policies, but still needs heating up, according to Liu.

The central bank will continue to implement monetary policy, provide sound financial services for residents and provide financial support for the development of the real economy, to boost consumption and increase consumption, as well as to promote consumption and rational investment, Liu said.

As the recovery of the macroeconomy continues, people's confidence in consumption and investment will be strengthened and household savings will return to normal as well, he added.

According to Liu's views, Xing said that real private consumption appears to grow over 9 percent this year from a low base, lifting GDP by 3.8 percentage points, as the job market recovery boosts incomes, normalizes consumption appetites and possibly reduces excess savings.