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Private consumption could emerge as a
greater driver of the Chinese economy in 2021 with the release of
increased precautionary savings and a full recovery of the job market,
according to a research report from Morgan Stanley. The
investment bank forecast China's real private consumption growth to
jump to 12.4 percent year on year in 2021, playing a larger role in
driving growth than exports and infrastructure investment. "We
expect the excess savings to be partly released in 2021, as consumer
confidence likely improves on the back of a broader job market recovery
and a more stable COVID-19 situation domestically," said Robin Xing,
chief China economist of the bank, in the co-authored report. China's
household income and saving rates rose this year as a faster recovery
in manufacturing and construction partly offset the job market pressure
in contact-based service sectors, according to the report. Official
data showed the country's per capita disposable income in Q3 went up by
3.9 percent year on year in nominal terms. The surveyed unemployment
rate in urban areas improved to 5.3 percent in October, 0.1 percentage
points lower than that of September. Meanwhile,
the labor market recovery is expected to expand into contact-based
service segments next year, which will also boost consumption, according
to Xing. Though the consumption
recovery has been asymmetric in 2020, as spending in segments such as
cars and mobile phones greatly improved while that in entertainment,
travel, and medical services remained lower than pre-COVID levels, Xing
predicted these laggard segments would catch up in 2021 considering
improved COVID-19 containment and future vaccine availability. Combined
with a rebound in government consumption on the back of better revenue,
overall consumption should contribute 6.7 percentage points to headline
GDP growth, according to the report.
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