How long can consumer savings last?

CHINA ADVISORY - Report 21 Oct 2024 by Andrew Collier

China is hoping a short-term stimulus package will revive the economy. The rumored size of a package keeps growing. Although a large stimulus package has not taken place, the impact of the slowing economy on ordinary citizens has been reduced due to the size of savings deposits in the banks and gains from the sales of people’s largest asset—property. But the question is: given job losses, salary cuts, and declining home values, how long can these savings prop up the economy? We draw three conclusions:

1) Retirement income, savings, and gains from property (for those who purchased at least since 2018) has helped to preserve wealth.
2) Data on consumption is stronger than I would expect given the problems of the property market. This raises questions about the accuracy of the information published by the central government’s National Bureau of Statistics.
3) According to academic research, China’s fiscal deficits historically have lowered consumer income. Growing deficits will lead to more unemployment and reduced income.

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