As Chinese people rush to save money, ‘everyone knows winter is here’ and is trying to get out of the cold

“The real estate market is bad, and the stock market is bad. Even wealth management products cannot guarantee positive returns.”

Mr Li, who runs a small business, considers himself lucky to have survived the pandemic, but millions of Chinese people are scratching their heads looking for money-making investments that don’t involve huge risks. He is a member of the middle class.

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The housing market and the stock market (two of the most common means by which Chinese people built wealth in the past) no longer offer the same level of security.

In the absence of these financial institutions, low-risk instruments such as high-denomination certificates of deposit (CDs), gold, and universal life insurance have become popular ways to preserve family wealth, according to wealth managers and researchers. It is said that there is

China’s benchmark CSI300 index, which tracks the 300 largest companies listed on the Shanghai and Shenzhen stock exchanges, has fallen 38% since January 2021, hitting a five-year low last week.

In the real estate sector, house prices in 70 large and medium-sized cities fell at the fastest pace in almost nine years in December, according to the latest data from the National Bureau of Statistics.

According to official statistics, by region, the total amount of real estate sold across China last year decreased by 8.5% from 2022, and sales revenue decreased by 6.5% from the previous year.

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Evelyn Xu, a wealth manager at a Jiangsu Bank branch in Hangzhou, Zhejiang Province, said that despite the People’s Bank of China’s several interest rate cuts in the past year, customers are becoming more conservative and are not buying CDs. He said he was particularly interested.

“Many customers are exiting private banking products and accepting three-year CDs,” she said. “And for those who invest in wealth management products, their expectation now is to ‘make sure they don’t lose money,’ rather than being obsessed with annualized returns that might have exceeded 5% in the past. is.”

Last summer, when bank interest rates were 3.3%, some people from other cities and regions bought three-year CDs at her bank, she said.

Although Chinese people traditionally prefer to save, data from the People’s Bank of China shows that new deposits in the country’s household sector have been increasing rapidly since 2022, well above the trend level of the past decade.

The total new household deposits in 2022 will be 17.9 trillion yuan (US$2.5 trillion), an increase of 8 trillion yuan from 2021. Last year, it remained at a high level of 16.67 trillion yuan.

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Meanwhile, Chinese households are increasingly rushing into gold, seeking security from precious metals.

Last year, China overtook India as the country that contributed the most to global gold consumption, according to a World Gold Council report late last month.

According to the report, China’s investment in gold bars and coins will increase by 28% to 280 tonnes in 2023, and in the global gold jewelry market, China’s demand for the same year will increase by 10%. That’s what it means.

It turns out the country is bucking the global trend of declining demand, with both individuals and governments buying more goods.

“Over the past year, gold remains popular and is mainly purchased as a safe-haven asset,” Xu said. “Prices have skyrocketed, but we expect them to reach new highs in 2024.”

Qianjiang Evening News quoted officials as saying that investors bought 3kg of gold bars at a time last month at a China Construction Bank branch in Hangzhou.

Su Mai, a senior manager at a foreign company in Shanghai, said she spent most of her family’s savings on a vacation home on the outskirts of Shanghai in 2020, and spent the next few years investing in wealth management products and investment trusts.

“When I first tried wealth management products, they all gave me a yield, but later on they were no longer guaranteed. So I turned to mutual funds, which turned out to be a nightmare.” She said the average loss so far has been 40%.

“I’ve never bothered to look at the market value of the house in that suburb, but I’d say it’s probably less than the purchase price,” she said. “Right now I want to keep the money in my hands.”

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For wealthy families that have cultivated an entrepreneurial spirit in the Yangtze River Delta region over the past few decades, the two most popular options for protecting wealth are large life insurance policies and trust funds, according to Wealth University Household Finance. said Jin Xin, who specializes in management. It is under the management of Ningbo University of Finance and Economics.

“Most founders are pessimistic about China’s growth prospects and the ability of their children to succeed them, so they need to plan for the long term,” he said.

“Jumbo insurance policies are, on the one hand, a good store of value and, on the other hand, can be used as collateral to secure a loan,” he said, adding that many other insurance policies are also available outside mainland China. It added that the assets were being transferred to a trust operated by . Especially in Hong Kong.

Growth in the country’s housing sector leverage ratio has remained sluggish since 2020 after strong growth over the past decade as investors became cautious, according to a report released last month by the National Institute of Financial Development. .

It was found that after recovering in the first three quarters of 2023, it decreased by 0.6 points from the third quarter to the fourth quarter, to 63.5%.

“As income growth expectations have weakened, households have actively reduced debt, increased the share of savings in assets, and reduced the share of risk assets in assets,” the report said.

Wu Fei, a professor at the Shanghai Institute of Advanced Financial Studies, part of Shanghai Jiao Tong University, said investors have become accustomed to big rewards during China’s rapid economic growth over the past few decades, but that is no longer the case. did.

“Everyone realizes that winter has arrived, and people are becoming more conservative and more aware of risk, especially when it comes to the real estate market and stock market,” Wu said.

“If you go outside in a warm room wearing only light clothes, you’ll feel very cold.”

Unlike in the past, when people could make money wherever they invested, they now need to broaden their horizons, have patience and be more independent thinkers, he suggested.