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BEIJING, January 11 (TMTPOST) —— Consumption growth is expected to be closer to 6-7% in 2023, assuming GDP growth of around 5%, according to the prediction made by Peng Yanyan, head of consumer sector research for UBS Securities China, at the 23rd UBS Greater China Conference on Wednesday.

2023 will be the first year that consumption will grow faster than GDP after the outbreak of the pandemic.

"A lot of people think consumers don't have money, but the truth is quite the opposite," Peng noted that China's savings rate rose from 29.9 percent in 2019 before the pandemic to 32.4 percent in 2022.  Among them, the savings rate of urban residents increased from 33.7 percent before the pandemic to 37.4 percent in 2022.  Between 2020 and 2022, excess savings of Chinese households are expected to reach 4 trillion yuan.

Excess savings will be an important driver of consumption this year.  According to Peng, the main reasons for restraining consumption in the past three years are the limited services consumption scenes and the lack of consumer confidence.  As offline consumption recovers and confidence picks up, consumer savings return to normal, and part of the excess savings will be converted into consumption, bringing about 10% consumption growth.  That demand will be released this year or next.

Where will consumers spend their money?  One such area, according to Peng, is service-related consumption.  In the past three years, industries related to daily life, such as food, beverage, tobacco, and alcohol, have not suffered much negative impact.  While restaurants, hotels, and tourism, which were in a downturn compared to the pre-pandemic situation, will naturally recover.

Another sector poised for a significant recovery is the big-ticket consumer durables sector.  With consumers more confident and willing to spend, demand for appliances, furniture, and relatively durable clothing in fast-moving consumer goods will recover.  On the other hand, global commodities have entered a downward cycle.  UBS forecasts that raw material prices such as aluminum and copper related to home appliance manufacturing, crude oil related to packaging materials, and palm oil-related to food production will decline significantly and that margins in downstream consumer goods industries will improve.

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