The anticipation is that these excess savings will lead to increase household consumption which will, in turn, lead to a more spontaneous recovery than in previous economic up-turns. Chinese economic recoveries in 2008 and 2015 were driven by investment expenditures from the Chinese government. This time around, higher savings and pent-up demand from Chinese consumers are anticipated to lead to higher consumption expenditure on goods and services within China. This is likely to support more robust Chinese economic growth, but the spillover effects of this to the rest of the world are likely to be more muted than during previous periods of economic recovery where China relied on much of the emerging world for hard commodities in the use of infrastructural expansion. Another consideration is possible parallels between China and the West in terms of emergence from the pandemic. During 2021 and 2022 we saw strong demand for goods from countries such as the US, as Western countries eased their lockdowns.
Analysts note that excess savings in China amounted to USD 2.5 trillion during COVID
This resulted in supply chain disruptions and elevated levels of inflation. Could China’s emergence from a three-year lockdown have a similar effect? Our view on this is that Chinese household spending throughout 2023 might be more subdued than the spending emergence from the pandemic in the West. In this regard, Chinese pent-up demand is comprised of saved household income, whilst in Western countries such as the US, the increased demand was a result of enormous stimulus packages given
6
Made with FlippingBook interactive PDF creator