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Facing weaker external demand and real estate market woes, Beijing pinned its growth hopes for 2023 on Chinese consumers, but they are opting to stash away much of their rising income this year. The government’s reversal of heavy-handed COVID-19 restrictions in December 2022 has led to an increase in spending, albeit hardly the surge that many had anticipated. In other major economies, the release of pent-up demand saw savings rates drop and spending spike, but this has not been the case in China. Flailing domestic demand leaves the Chinese economy dependent on the West, undermining Beijing’s desire to build an alternative to the economic system touted by the United States and its allies.

Given the high level of uncertainty surrounding the savings patterns of Chinese consumers and the importance of consumption growth to the Chinese economy, Morning Consult conducted a custom survey focused on Chinese consumers’ savings habits. The survey was fielded July 21-25, 2023, among a sample of 1,012 internet-using adults, and the data provides novel insights into the state of both the Chinese consumer and the domestic economy. Most notably, savings rates have increased relative to already high 2022 levels, with the average household placing the bulk of unspent income into safe assets.

Chinese consumers are earning more but spending less

Morning Consult data indicates that Chinese households are increasing their savings in 2023. In our July survey, 71% of respondents said their household had at least as much money left over at the end of the month relative to a year ago, with 35% saying they had more. When asked about savings intentions for 2023 compared with 2022 — already a bumper year for savings — a whopping 46% said they plan to save more this year than last. Only 11.1% said they would save less.

The increase in savings is largely attributable to rising incomes, with about half of respondents who reported saving more this year citing increased household income as the primary reason. However, 36% said they were spending less on discretionary (24.5%) and essential (11.5%) items.

The anticipated wave of post-pandemic “revenge spending” hasn’t come

Crucially, very few Chinese consumers are diverting their household income from savings to spending — an expectation many analysts and policymakers had hoped would drive growth this year. Among those who plan to save less in 2023, 18% said this was primarily due to spending more on discretionary items. In fact, only 2% of the overall share of Chinese adults surveyed said they would increase discretionary spending at the expense of their savings.

For many Chinese, more money translates to more savings

It’s unrealistic to expect a large shift in consumption behavior in the near term. In addition to the data cited above, we also took a reading of savings and income levels in July. The panel data collected suggests that, among the 71% of households who reported having money left over last month, savings rose quickly with incomes: Each additional yuan in income corresponds with a 0.27 yuan increase in savings.

This rate is not exactly equivalent to the marginal propensity to save since it excludes households with no or negative monthly savings in July. However, it does confirm that higher incomes generally correlate with higher savings among those who saved money in July.

Savings accounts and cash are preferred over investments

After trimming the top and bottom 15% of responses in order to cut down on the number of outliers and focus on the central 70% of the distribution, we find that 77% of respondents who had money left over in the previous month said they put at least some of this into their savings account, while 51% stashed it away as cash. Looking at average monthly savings reported by respondents, 88% went into a savings account while 12% was saved as cash. Almost none of the savers in the middle of the distribution reported channeling their savings directly into equity, debt or property investments.

When wealthier Chinese households are left in the sample, we see a more substantial share of savings going into investments. With a 1% trim applied — i.e., when only the top 1% of respondents are excluded as opposed to 15% — the share of total reported savings channeled into investments increases to 12%, with 5% going to property, 4% to equity or debt investments, and 3% to “other” investments.

Looking at overall wealth, Morning Consult confirms that the vast majority of Chinese household savings are tied up in the housing market, with high-earning households tending to have a larger share of wealth tied up in property and investments. When looking at the central 70% of the distribution in the July survey, we find that 54% of total reported wealth was tied up in equity in respondents’ primary residence. This figure increases to 60% when looking at the central 98% of the distribution. We also see a rise in the share of wealth in other investments. However, only 8% of total wealth is allocated to nonresidence real estate investments, debt or equity investments, or other types of investments.

With the Chinese consumer holding back in 2023, the outlook for the country’s economy looks relatively weak, with growth rates likely to fall short of ambitious government targets. Beijing looks unlikely to inject the kind of stimulus that most economists believe is necessary to breathe life into the economy in the short term. Instead, President Xi Jinping is opting for further debt reductions in the property sector, emphasizing long-term stability over short-term growth. Looking more directly at policies impacting the savings rate, we see little emphasis on incentivizing households to save less for retirement and spend more in the present.

In the current environment, the high expectations set at the start of the year following the shift away from “zero-COVID” policies are being reined in. A timid Chinese consumer will mean weaker growth and demand, with anticipated tailwinds for the global economy looking more like headwinds.

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