Some point out that Chinese households are unusually liquid. Their bank deposits now exceed 12trn yuan ($18trn), and 13trn yuan more than might have been expected given pre-pandemic trends, according to Citigroup, a bank. These deposits could provide ammunition for “revenge spending”.
　　Perhaps a more accurate way to assess the forthcoming spending boom is therefore to look at the gap between household in coming and consumer spending. In the three years before the pandemic, households saved 30% of their disposable income. During the pandemic they saved 33%. The cumulative result of this extra saving is about 4.9trn yuan. If consumers added to their spending this year it would increase their consumption by 14%.
　　It is estimated that consumption could account for the lion’s share of China’s growth this year almost 80% according to Citigroup, if government spending on services is included. This would be the highest share for more than two decades.
　　China’s recovery will make a welcome contribution to global growth. According to the IMF’s forecasts, released on January 30th, the country’s economy will grow by 5.2% this year, accounting for two-fifths of the expansion in the world economy. Together, America and the euro area will contribute less than a fifth.
　　A recent study by economists at America’s Federal Reserve makes a basic point with its title: “What Happens in China Does Not Stay in China”. Their estimates suggest the expansion in China’s GDP of 1% adds about 0.25% to the rest of the world’s GDP after a year or two. If China’s domestic growth rate from 3% to 5-6% this year, the spillover effects may be 0.5-0.75% of the rest of the world’s GDP, or about $400bn-600bn at an annualized rate.