The rapid transition towards endemic living has led to a major upward revision to our growth forecast. We now expect GDP growth to reach 5.5% in 2023. 

The surge in Chinese bank deposits overstates the extent of “excess savings”, but one does not need to appeal to a deposits rundown to believe consumption can rebound. Returning to normal rates of consumption out of income should be enough for nominal consumption to rise by around 14% in 2023. 

If households tap the RMB 4.2tn buffer built up over the pandemic, annual consumption growth could reach 20%. But the potential for this to trigger stronger services inflation, or leak into foreign holidays could also temper the boost to real GDP. 

Policy rhetoric may have turned ‘pro-growth’, but it is unlikely that the authorities will really increase stimulus when the economy is rebounding. 

Our Chinese Financial Conditions Index has moved out of accommodative territory, while local governments are likely to dial back infrastructure spending to repair their fiscal positions.