From The Christian Science Monitor:
Later on down the article, this is an interesting clip:
Beijing - Li Wen, the manager of a Citroen auto dealership in south Beijing, is pretty proud of himself. As car sales across China dive, torpedoed by the international crisis, his figures are holding up.
He is the sort of model entrepreneur whose example the Chinese government badly wants others to follow, as the authorities pin their hopes of staving off an economic slump on a boost to local consumption.
"Stimulating domestic demand is the most important factor to cope with the global financial crisis," the governor of China's central bank, Zhou Xiaochuan, said recently. "We need to adopt more comprehensive policies to support ... consumers' spending patterns."
One of Mr. Li's own policies – to offer more financing to car buyers – illustrates just how hard it could be to persuade a nation of savers to spend their country's way out of trouble.
Almost all of Li's customers – traditionally wary of falling into debt – pay cash on the nail, in full, for their autos. This year, he hopes to persuade 20 percent of them to take out loans that he has arranged with local banks. "We have to encourage consumers to buy," he says. "We dealers have to provide services to boost consumer confidence."
The average Chinese family saves some 30 percent of its income, partly because China's social security net is weak; people have to rely on their own resources to pay for a hospital stay, for example, or for a child's education.This savings rate, fueled by a more responsible credit culture than the West, seems to be a good thing to me. Now I understand that demand and spending stimuate economies, but the Chinese, who actually buy what they can afford, seem to be way ahead of the game compared to Americans.
Why am I ragging on the spending-crazy Americans and praising the frugal Chinese? Check out the beginning of this article from The Christian Science Monitor in 2005:
Americans have stopped saving for a rainy day.There is just a different attitude towards debt and spending in China compared to the US. Although there are signs that Americans realize how unsustainable their lives have been for the past several decades. From CNN on December 11:
Instead, they are living paycheck to paycheck, depending on credit cards to get them through emergencies, and hoping that the rising value of their homes will give them a retirement nest egg.
This personal economic chasm is showing up in the national savings rate, which has been declining for years. Tuesday, the Commerce Department reported that the personal savings rate fell to zero in June, the lowest since a one-month buying binge in the aftermath of the 9/11 attacks. The United States is on track to record a savings rate for the year below 1%, which would be the lowest since the depths of the Great Depression, when the rate turned negative.
NEW YORK (CNNMoney.com) -- It's a sign of the times: Americans are pulling back on the debt they use to spend and fuel the economy, while their net worth is declining.In China, I pre-pay my electricity, gas, cell phone, and internet. In this kind of society, if I don't watch how much electricity I have on my meter, the lights go out.
The government reported Thursday that household debt in the third quarter fell for the first time ever. Meanwhile, net worth dropped by the largest amount on record based on data going back to 1951.
This seems simple enough to me now that I've been in China for a while. But when I first came to China three years ago, this lack of credit truly annoyed me. I kept thinking, "Why can't they just bill me for what I spend later?"
Now I can identify that my thinking at the time was unmistakenly one of an American who'd grown up in the most consumptive culture in the history of the world.
When I tell Chinese people about the culture of credit that I come from in the US, they cannot wrap their minds around it. Essentially, they don't understand how we, initially, get something for nothing and are then trusted to pay things back later. That seems so counter-intuitive to them.
The longer I stay in China and outside of America, the harder it is getting for me to understand America's utter dependency on credit and the encouraging of its people to live either beyond their means or to the absolute limit of them.