Household consumption in China remained stubbornly weak in Q2 despite the rapid rebound in GDP. But this isn’t a reason to be overly concerned about the immediate outlook. With fiscal stimulus still being ramped up, the recovery can continue to rely heavily on state-led investment in the near-term. And the upside of the elevated savings rate is that household balance sheets have improved. This paves the way for an even stronger recovery once consumer confidence returns, which seems likely before long given the ongoing improvement in labour market conditions and the government’s success in holding down the number of new COVID-19 infections.
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