china’s consumption recovery: the role of high savings
in 2022，china’s total retail sales fell 0.2% year on year，the second year of negative growth since 1969 (the last time was 2020 when covid-19 broke out)，while household savings deposits rose sharply by 17.8 trillion yuan，almost 8 trillion yuan more than in 2021，a record high. policymakers want a targeted solution to insufficient demand. "using consumption as a lever to accelerate economic recovery" has sparked a heated debate on whether high savings can drive consumption recovery.
predicting the consumption trend this year depends on two key factors: income growth and the wealth effect. regarding the latter，in my view，the high savings accumulated by chinese households in 2022 were due to the decline in new home sales，a shift from wealth management products to deposits，and lower consumer spending，so there is still uncertainty about whether a reduction of savings will boost consumption this year. moreover，analysis of the wealth effect cannot focus only on the change in household savings，but also on broad change in household balance sheet.
in terms of the main components of the household balance sheet，if policymakers actively promote the gradual stabilization of the property market，the recovery of the capital market and the accelerated improvement of the social security system in 2023，the wealth effect of the household sector will emerge and，combined with the release of the high savings accumulated in recent years，there will be greater potential for china’s consumption recovery. of course，this still requires employment and income growth.
three major factors have driven significant growth in household savings
