The Central Economic Work Conference held in Beijing in December highlighted the importance of consumption for the recovery of the Chinese economy.

Accordingly, the central authorities urged local governments to prioritize rebooting and expanding consumption by enhancing families' spending power, improving the consumption environment and creating new consumption scenarios so as to fully release the consumption potential of society.

Statistics of the central bank indicate that the household deposits in the country increased by 17.84 trillion yuan ($2.6 trillion) last year, 7.94 trillion yuan more than that in 2021, hitting a record high. And the fast growth continues to accelerate this year, as it surged by another 6.2 trillion yuan last month, a record high for the same period and an increase of 790 billion yuan year-on-year. How to convert the savings into consumption has become a pressing challenge.

But it should also be seen that the majority of the increase in household deposits come from high-income families, as many lower-income families have had to rely on previous savings for a living due to the influence of the COVID-19 pandemic.

The high leverage ratio of the household sector in China is another defining feature of the distribution of national wealth. Data from the central bank show that China's household leverage ratio reached 72.2 percent in 2021, surpassing that of developed countries.

As such, the coexistence of excess savings and high leverage ratios clearly explains the income gap and the weak consumption in the country. And high housing prices directly inhibit consumption.

So the future growth of consumption should mainly come from efforts to increase the income of the low-income groups by accelerating the recovery of the service sector, a main source of jobs for these groups, increasing investment in infrastructure and public housing, pressing ahead with rural vitalization and carrying out more well-targeted work relief programs.

Meanwhile, policymakers should continue to enhance the production efficiency of the manufacturing industry, improve the business environment for enterprises, increase the wages of workers in the manufacturing industry and promote the upgrading of the service industry so as to form a sustainable economic structure and a virtuous cycle that is conducive to narrowing the income gap.