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How China’s Savings Glut Is Holding Back Its Economic Recovery

Richemont (SIX:CFR) Expects Strong Benefit from Chinese Demand Recovery

China has a long tradition of saving for various reasons, such as precautionary motives, cultural norms, demographic factors, and limited social welfare. According to the People’s Bank of China (PBOC), China’s household savings rate was 37.1% in 2021, much higher than the global average of 25.4%.

China’s savings rate increased further in 2022, as the COVID-19 pandemic and strict lockdown measures curtailed consumer spending and income growth. Data from the PBOC show that renminbi deposits held by households nationwide grew by a record Rmb17.8tn ($2.6tn) in 2022, compared with Rmb9.9tn in 2021.

Some analysts expected that these excess savings would be unleashed once the pandemic was under control and the economy reopened, leading to a surge in consumption and investment. However, this has not happened so far, as many Chinese savers remain cautious and conservative in their financial choices.

How China’s Savings Behavior Affects Its Economy

China’s high savings rate has both positive and negative implications for its economy. On the one hand, it provides a large pool of domestic funds that can be used for productive investment and innovation. It also helps China maintain a current account surplus and accumulate foreign exchange reserves, which enhance its external stability and bargaining power.

On the other hand, China’s high savings rate also reflects some structural imbalances and inefficiencies in its economy. For example, it indicates that China’s consumption is too low relative to its income and output, which reduces its domestic demand and makes it overly reliant on exports and investment for growth. It also suggests that China’s financial system is not well developed and diversified enough to offer attractive and accessible investment opportunities for savers, especially for small and medium-sized enterprises (SMEs) and private sector firms.

Moreover, China’s high savings rate may pose some risks and challenges for its monetary policy and financial stability. For instance, it may create excess liquidity and inflationary pressures in the economy, which require the central bank to tighten its policy stance and drain funds from the market. It may also create asset bubbles and distortions in some sectors, such as real estate and shadow banking, which increase financial vulnerabilities and systemic risks.

What China Is Doing To Encourage Spending And Investment

China’s government and central bank have been trying to stimulate consumption and investment by various means, such as fiscal stimulus, monetary easing, tax cuts, social transfers, financial reforms, and market opening. However, these measures have not been very effective so far in changing the saving behavior of Chinese households and businesses.

One recent attempt by the authorities was to persuade the “big four” state-owned banks to lower their deposit rates in May 2023, in order to reduce the attractiveness of bank savings and encourage more spending and investment. However, this move seems to have backfired, as many depositors rushed to buy other safe products with higher returns, such as treasury savings bonds and certificates of deposits (CDs).

This shows that China’s savers are not easily swayed by small changes in interest rates or incentives. They are more influenced by their expectations about the future economic outlook, income prospects, social security, and financial risks. Therefore, to boost consumption and investment in China, more fundamental and structural reforms are needed to address these underlying factors that affect saving decisions.


China has a large amount of savings that could potentially support its economic recovery and growth. However, many Chinese savers are reluctant to spend or invest their money in anything other than the safest options. This reflects a lack of confidence and risk appetite among households and businesses, which is holding back China’s post-pandemic rebound.

To encourage more consumption and investment in China, the authorities need to implement more comprehensive and long-term reforms that can improve the efficiency and inclusiveness of the financial system, enhance the social safety net and welfare system, reduce income inequality and wealth concentration, foster innovation and entrepreneurship, and promote a more balanced and sustainable growth model.

Rogerio Alvarez is an experienced financial journalist and author who specializes in covering economic news for With a deep understanding of global finance and a passion for uncovering the stories behind the numbers, Rogerio provides readers with comprehensive coverage of the latest economic developments around the world. His reporting is insightful and informative, providing readers with the knowledge they need to make informed decisions about their investments and financial strategies.