Illustration: Chen Xia/Global Times

China's central bank, the People's Bank of China, recently released data saying aggregate bank savings increased by 26.3 trillion yuan ($3.92 trillion) in 2022, including 17.8 trillion yuan of household savings. In January this year, Chinese households' deposits at the banks rose a whopping 6.2 trillion yuan, setting a new monthly record high.

If only one fifth of the 17.8-trillion-yuan extra household savings is spent in 2023, the country's domestic consumption will be significantly accelerated, firing up retail sales and the annual GDP growth, economists say. 

A survey done by the central bank in the fourth quarter of 2022 showed that 61.8 percent of Chinese people wanted to "save more." How to decrease Chinese households' propensity to save at the banks and inspire more private spending? To resolve the high savings paradox or conundrum, it is imperative to encourage more current consumption, particularly among the younger generation, who are more prone to change the traditional habit of "always saving for future rainy days."

More efforts need to go to creating higher "domestic-leg demand" in implementing the country's "dual-circulation" development strategy in 2023 and beyond, as the global economy, embroiled in a stubborn inflation, now faces a severe slowdown - which will likely restrain Chinese exports this year. So, propelling domestic consumption is pivotal to reignite the country's giant economic engine and strive for a higher growth rate after the three long years of pandemic-induced jolts and bumps. 

China's comparatively higher savings rate - which some economists put at more than 45 percent of Chinese household earnings - has strongly bolstered Chinese financial organizations, helping the country's giant state-owned enterprises to borrow heavily from the banks to invest on nationwide infrastructure projects build-up, such as the 42,000-km-long high-speed railways and the glittering urban subway system scattered in the country's all tier-1 and tier-2 cities. 

But the strategy of investment-led, credit-fueled growth model cannot categorically offset sluggish household consumption. A standard recommendation for China's economy for the past decade is to "rebalance" toward being an economy driven by domestic consumption.

From 2020 to 2022, Chinese households were just shrouded in too many "unknowns," such as when the pandemic would come to an end. Naturally, some people delayed property purchases and pulled out of the stock market and other underperforming financial assets - including the banks' wealth-management products which suddenly pulled back in valuations at the end of last year - in favor of keeping their money in bank deposits. 

The central government's decision to downgrade COVID management by removing most restrictive measures in December has turned to be a great success, as the infection cases have plunged to a trickle now. As a result of the reopening, China's economic activity is rapidly accelerating.

To ramp up Chinese household consumption in the post-pandemic period, the country is expected to make more efforts to deal with the costs of health care, housing and children's education, and phase in a solid social safety net that takes better care of the low- and middle-income families. 

Housing consumption this year is expected to spiral up, as urban housing is becoming more affordable now, thanks to the government's de-leveraging efforts in the past two years to rein in the debt levels of mega developers. Now, Chinese regulators are relaxing controls on housing purchase while work out more preferential mortgage policies to prop up property sales.

Nurturing domestic demand, which has been highlighted by many key government meetings, will undoubtedly be a major growth driver for China in 2023. The authorities are expected to promote consumption of cars and other big-item electric appliances to further tap the potential in supporting economic growth while maintaining stable macroeconomic policies to anchor market expectations. Household services consumption, on education, leisure, medical care, entertainment, travel and sightseeing and more, will be inspired this year. Economists said such a move is a reflection of the dual-circulation development strategy, and also reflects the nation's emphasis on high-quality growth. 

Only when households feel secure and sanguine about their future, they are more willing to open up their pockets. For the low-income households, the government ought to consider issuing consumption vouchers to them. Some economists said the country could also increase social protections and offer more welfare benefits for the public which will set the basis for a healthy and sustainable development path.

The author is an editor with the Global Times. bizopinion@globaltimes.com.cn