China Only Invests in Savings and Gold... Risk Assets Face a 'Harsh Winter'

Money Flows into Deposits as Real Estate and Stocks Slump
Surpasses India Last Year to Become World's Top Gold Buyer

The preference for safe assets is becoming more pronounced due to the delayed economic recovery in China. At the same time, the aversion to markets such as stocks and real estate, which seem unlikely to rebound in the short term, continues.

On the 16th, Hong Kong's South China Morning Post (SCMP) reported that "risk aversion among China's middle-class investors is intensifying," noting that "gold investments are increasing, and low-risk bank deposits are on the rise."

SCMP introduced a woman from Hebei Province who recently deposited 200,000 yuan (approximately 36.84 million KRW) in a small regional bank, earning an annual return of 3.2%. She said, "Bank deposits do not offer great rewards, but at least the returns are predictable." The report described her as "one of the millions of Chinese middle-class individuals seeking low-risk investment options."

Traditionally favoring savings, the Chinese people's tendency toward deposits has intensified since 2022. Household new deposits rose from about 9.9 trillion yuan in 2021 to 17.9 trillion yuan in 2022, maintaining a high level of 16.67 trillion yuan last year as well.

Gold investment is also increasing in the same context. According to a report released last month by the World Gold Council, China surpassed India last year to become the world's largest consumer of gold. China's investment in gold bars and coins increased by 28% year-on-year to 280 tons last year, and total gold purchases also rose by 10% during the same period to 630 tons.

On the other hand, China's risk asset markets such as stocks and real estate are experiencing a prolonged downturn. Although there was a brief rebound recently, the Chinese benchmark CSI300 index plunged 38% last month compared to January 2021, falling to its lowest level in five years. According to the National Bureau of Statistics, the total value of real estate sales across China last year decreased by 8.5% year-on-year, and sales revenue dropped by 6.5%. In December, housing prices in 70 cities fell by 0.4% month-on-month, marking the fastest decline in nine years.

[Image source=Reuters Yonhap News]

There is also analysis that the slowdown in medium- to long-term economic growth and reduced opportunities are causing a focus on 'preserving' wealth rather than investing. Jin Xin, a professor at the Asset Management University under Ningbo University of Finance and Economics, explained, "For the wealthy who have built their fortunes over decades as entrepreneurs in the Yangtze River Delta, large-scale insurance products and trust funds are the most popular." He added, "Most of them are pessimistic about China's economic growth and the capabilities of the next generation, so they require more long-term planning."

Wu Fei, a professor at the Shanghai Advanced Institute of Finance under Shanghai Jiao Tong University, emphasized, "Everyone realizes that winter has come and is becoming more conservative, especially in the real estate and stock markets." Professor Wu continued, "It's like stepping out of a greenhouse and feeling the cold snap more intensely. Unlike the past when there were opportunities wherever you invested, now you need to broaden your perspective and think more independently."

This content was produced with the assistance of AI translation services.