Even for a famously frugal nation, Chinese people saved a lot last year. Stuck at home due to Covid restrictions, they socked away a record $2.6 trillion. Now that life is returning to normal, hopes are high that consumers will spend with a vengeance, providing a much-needed boost to the world’s second largest economy, the impact of which would be felt around the world. Household savings at banks surged by a record high of 17.84 trillion yuan ($2.6 trillion) in 2022, up 80% from 2021, according to the People’s Bank of China. That’s more than one third of households’ total income. Before the pandemic, people saved about a fifth of their income. With pandemic controls lifted, Chinese shoppers appeared to be enjoying their freedom to spend. Hotel bookings, movie tickets and restaurant sales all boomed during the recent holiday season. The reawakening of the Chinese consumer will be an “exciting story” for global investors in 2023, said Swetha Ramachandran and Jian Shi Cortesi, investment directors at GAM Investments, a global asset management firm based in Zurich. “Chinese consumers are now going into reopening with strong household balance sheets,” they said, adding that Chinese companies exposed to discretionary spending and global luxury brands stand to gain significantly from the trend. More than 300 million travelers spent a total of $56 billion over the seven-day Lunar New Year holiday through January 27, up 30% from a year ago, according to the cultural and tourism ministry. According to the State Tax Administration, sales from consumer-facing businesses were 12% higher than pre-pandemic 2019 levels. Bookings for hotels soared more than 10 fold at some of the hottest tourist attractions, such as the cities of Xi’an and Luoyang, according to online travel agency Tongcheng Travel. Xi’an’s Terracotta Army museum was so crowded that visitors complained on social media they could only see other people’s heads rather than the statues. Restaurants reported higher sales than before the pandemic and were unprepared for the increased demand, according to a national survey published by the China Cuisine Association last week. More than a third of respondents said they were “extremely” short-staffed during the holiday. China’s box office receipts climbed to more than $1.5 billion last month, the best January on record, according to the China Film Administration. That’s mainly thanks to an extraordinary holiday week, when moviegoers paid 129 million visits to cinemas. High hopes The recovery in consumption has already lifted the Chinese economy. Last week, the Caixin/S&P Global services purchasing managers’ index (PMI), which tracks activity in the services sector, expanded in January for the first time in five months. That’s mainly because travel and consumer spending bounced back. The index, which mainly covers smaller, private businesses, mirrored the results of an earlier government PMI survey. The data added to evidence of a rapid rebound in economic activity, analysts said. The boom has fueled business confidence. After seeing record sales in many stores, Xiabuxiabu, one of China’s largest hot pot chains, opened 34 new stores last month in the country, the company said. Global luxury giants are also hopeful Chinese shoppers will come back. LVMH said in January that it was “confident” and “optimistic” that China’s luxury market would bounce back this year. LVMH CEO Bernard Arnault said its stores in France are ready to welcome Chinese shoppers as more travel restrictions are eased. Burberry\n \n (BBRYF) said last month that it’s seeing “very promising” signs in China, according to Reuters. One laggard There’s one conspicuous laggard in consumption, however. Property sales by China’s 100 largest developers dropped 32% in January, according to data compiled by China Real Estate Information, a property research firm. In the nation’s 30 largest cities, property sales were only 60% of the 2022 level. Chinese households have been reluctant to buy homes for more than a year, as Covid curbs, falling home prices and rising unemployment discouraged prospective buyers. Mortgage protests that erupted in dozens of cities last year further dented buyers’ confidence. Despite a flurry of stimulus measures, the slump has shown no sign of improvement. By December, new home prices had fallen by 16 straight months, according to the most recent government statistics. Since real estate accounts for 70% of household wealth in China, “revenge spending” will be limited, analysts said. “The property industry remains the biggest drag on China’s economy,” said Raymond Yeung, chief economist for Greater China at ANZ Research, adding that the high youth jobless rate and asset price deflation will constrain China’s consumption recovery. Not like the US BNP Paribas says “revenge spending” in China is set to happen, although it will be on a smaller scale than in Western economies such as in the United States. “The removal of Covid restrictions should unleash pent-up demand, and we expect the biggest driver of the recovery in 2023 to be consumption,” its analysts said. They expect household consumption growth to rebound to 9.5% in 2023 from about 3% in 2022, fueling annual GDP growth of more than 5%. Morgan Stanley analysts expect to see some “revenge spending” mostly from household with stable incomes. Those households include employees from the export sector, a rare bright spot in the Chinese economy during the pandemic years, business owners with steady earnings or those living off payouts from asset holdings. “We see a mini-rebound as early as in the first quarter of 2023,” they said, adding that the recovery in consumption could pick up in the second half of this year, but would still be lower than the pre-Covid level. They’re expecting household consumption growth to rebound to 8.5% in 2023, contributing to full-year economic growth of 5.7%.