Spending spotlight falls on China’s ‘shadow savers’

Middle-class shoppers in China are sitting on mountains of cash but refusing to spend it. Instead, they have kept their wallets closed and become “shadow savers.” The fallout risks having dire consequences for an already fragile global economy.

To illustrate the depth of the problem, household bank deposits surged to 118% of GDP by the end of 2025, or trillions of US dollars. Fear is fueling this drive, despite rock-bottom interest rates. Concerns about job security and the property crisis loom large in the background.

“Households aren’t broke – the available data indicate. They’re just exhibiting a reluctance to spend,” MarketWatch, which is part of The Wall Street Journal group, reported at the weekend. “It could short-circuit the global economy.”

The real estate collapse has crumbled the foundations of household wealth. Home prices have tumbled sharply, forcing families to cut spending. The job market is also terrifying workers, while wage growth is in the deep freeze. Upheavals in the tech sector continue unchecked. 

“The bulk of this extra saving is precautionary as consumers saved more because of an uncertain income outlook, and this process could be partially reversed,” Robin Xing, the chief China economist at Morgan Stanley, pointed out.

For now it seems a new economic identity is emerging.

Christian Yao, Victoria University’s School of Management

Behind the news: 

• A key stumbling block is weak social safety nets, such as inadequate pensions and healthcare, the International Monetary Fund stressed.
• Unemployment benefits also struggle to provide even basic cost-of-living coverage, according to an IMF working pape in December.

Delve deeper: “This is about more than just saving money,” Christian Yao, a senior lecturer at Victoria University’s School of Management in Wellington, wrote in The Conversation last year, with dark clouds hanging over China’s economy.

Between the lines: “Traditionally, Chinese culture has valued career success and family status, but job scarcity and falling house prices are challenging old assumptions,” he said.

Big picture: “Whether this is a long-term trend or merely a strategic adjustment, for now it seems a new economic identity is emerging. Either way, one thing is certain – when the world’s second-largest economy changes how it spends, everyone feels it,” Yao warned.

China Factor comment: Beijing has struggled to stimulate consumer spending, relying instead on its export machine to boost growth. Yet this model is inherently flawed. Without rising domestic demand by instilling confidence at home, the malaise will only deepen.