Goldman Sachs Group, a leading Wall Street investment bank, estimates that Chinese household savings are currently about 2 trillion yuan ($308 billion), but Chinese people now have a low willingness to spend and are unlikely to let go of their money, bad news for Communist Party officials who want the people to spend more money to boost China’s economy.
Bloomberg reported March 16 that Goldman Sachs economists, led by Maggie Wei, wrote in a report that Chinese consumers saved 2 trillion yuan in cash in 2020, surpassing the level before the Communist Party virus and accounting for an estimated 2 percent of gross domestic product (GDP) and 7 percent of total household consumption.
Goldman Sachs economists said the high level of savings by Chinese households is likely to play no role in boosting consumption this year, based on data observations, as Chinese households may have put cash into less liquid assets such as mutual funds and Time deposits. Urban consumers account for a larger share of savings, but they are less willing to increase spending than rural consumers.
Goldman Sachs estimates that Chinese households’ savings rose to 33.9% of disposable income by the end of 2020, up from about 30% in 2019. Precautionary savings among Chinese households have grown due to the country’s inadequate social welfare system, according to the report.
Compared to the U.S., China’s cash reserves are relatively small. Goldman Sachs estimates that U.S. savings account for 11% of GDP. Bloomberg economists calculate additional global savings at $2.9 trillion, of which U.S. households account for half.
Goldman also predicts that Chinese households will still spend less this year and in 2022 than they did before the Communist Party virus, but could still grow at an annual rate of 13 percent this year due to last year’s low base.
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